Listed Property

Dear Investor,

The Tamim Listed Property Fund was down -1.11% in September, once again finishing ahead of both of its benchmarks in a difficult month for listed property. The Australian REIT index declined -1.80% and the Global REIT index fell -6.25%. Rising bond yields continued to weigh on property valuations globally, however the Fund’s active stock selection, diversified sector exposure and cash position again helped to protect capital.

Australian Listed REIT Portfolio (AUD)

Australian listed property markets declined for a second consecutive month in September, with the S&P/ASX 200 A-REIT Index falling -1.80%. Australian government bond yields rose to their highest levels since 2011 during the month amid persistent inflation and expectations that interest rates will remain higher for longer, keeping pressure on yield-sensitive property trusts.

The standout contributor for the month was Ingenia Communities, which rallied strongly after receiving a series of takeover proposals from private equity firm Warburg Pincus. The Ingenia board rejected initial proposals of $4.75 and $5.05 per security as undervaluing the business and, at month end, was assessing a further revised non-binding proposal of $5.25 cash per security. The proposal would require Ingenia to abandon its agreed acquisition of residential land developer Peet. The approach highlights the value private capital sees in high-quality lifestyle and land lease communities, and the gap that has opened between listed property prices and underlying asset values. We continue to monitor the process closely.

Retail landlords were weaker during the month, although the operating fundamentals of Vicinity Centres and Scentre Group, which remain among the Fund’s largest positions, continue to be supported by high occupancy, positive leasing outcomes and the limited supply of new high-quality retail space. Goodman Group also remains a core holding, providing exposure to high-quality logistics and industrial property globally together with a substantial data centre development pipeline. While Goodman’s valuation is sensitive to movements in interest rate expectations, we continue to view its development capability and exposure to digital infrastructure demand as a significant long-term structural growth opportunity.

GPT Group, Stockland and Mirvac provide the Fund with a diversified mix of retail, logistics, office and residential property. Dexus remains the portfolio’s main office exposure, alongside smaller positions in Centuria Office REIT and Cromwell Property Group. Office conditions continue to be more challenging than other property sectors, however the significant discounts to underlying asset values across parts of the listed office sector provide potential upside should transaction markets and investor confidence improve.

Specialist and non-discretionary property exposures including Region Group, Centuria Industrial REIT, Charter Hall Long WALE REIT, Waypoint REIT, Growthpoint Properties Australia, BWP Property Group and HomeCo Daily Needs REIT provide further diversification across convenience retail, industrial property, long-duration leased assets, service stations and large-format retail. These businesses generally offer predictable, contracted rental income, a valuable characteristic in the current environment.

At the end of September, the largest positions were Vicinity Centres, Goodman Group and Scentre Group, with cash representing approximately 14.3% of the Australian portfolio. This cash allocation continues to cushion the portfolio against market weakness and provides flexibility to take advantage of the more attractive entry points that have emerged across the sector.

The Fund’s outperformance in another weak month for the A-REIT market, together with the takeover interest in Ingenia, reinforces our view that the listed market is undervaluing many high-quality property businesses. We continue to favour companies with high-quality assets, sustainable cash flows, disciplined balance sheets and management teams capable of creating value through both operating performance and capital allocation.

International Property Portfolio

Global listed property markets fell sharply in September, with the Global REIT Index declining -6.25%. The US Federal Reserve raised interest rates by 25 basis points in response to above-target inflation, and the US 10-year Treasury yield rose to levels not seen in nearly a quarter of a century, weighing heavily on property valuations. The decline was broad-based, with almost every property sector finishing the month lower.

Residential property is the portfolio’s largest sector exposure in aggregate. Following the merger of AvalonBay Communities and Equity Residential, the combined company, Vivmark Residential, is now the largest apartment owner in the United States, with more than 180,000 apartments, and has become one of the portfolio’s largest underlying holdings. Residential exposure also includes apartment owners Essex Property Trust, Mid-America Apartment Communities, UDR and Camden Property Trust, single-family rental operators Invitation Homes and American Homes 4 Rent, and manufactured housing and lifestyle communities through Sun Communities, Equity LifeStyle Properties and UMH Properties. Higher mortgage rates continue to make home ownership less affordable, which supports rental demand, although rising bond yields weighed on residential valuations during the month.

Healthcare real estate was again among the more resilient sectors, declining less than the broader market. Welltower, the portfolio’s largest underlying holding, and Ventas continue to benefit from improving senior housing fundamentals, with ageing demographics supporting demand while occupancy and operating margins continue to recover. The portfolio also holds smaller positions in Healthpeak Properties and Diversified Healthcare Trust.

Digital infrastructure exposure through Equinix, Digital Realty and Iron Mountain also held up better than the broader market. Data centre fundamentals remain strong, driven by artificial intelligence, cloud computing and growing enterprise demand for computing capacity, and we continue to view high-quality digital infrastructure as one of the most compelling long-term opportunities within global property.

Prologis, the portfolio’s second-largest underlying holding, together with self-storage owners Public Storage and Extra Space Storage, declined alongside the broader market as higher yields weighed on valuations. Demand for well-located logistics facilities remains healthy over the longer term, while both self-storage businesses continue to generate attractive operating margins and resilient cash flows with relatively low ongoing capital requirements. Net lease and gaming exposure through Realty Income and VICI Properties was among the weaker areas during the month given the bond-like nature of their long-duration leases, although these leases continue to provide stable and predictable income. Retail exposure through Simon Property Group was also lower.

While the portfolio is weighted toward the United States, it also includes smaller exposures to listed property in Japan, the United Kingdom, Singapore, Canada and Europe. The international portfolio’s significant cash position, together with a weaker Australian dollar, helped cushion it from the full extent of the global decline.

Overall, September was another reminder of the sensitivity of listed property valuations to movements in bond yields. However, the underlying operating performance of the portfolio’s major property companies remains sound, and the growing gap between listed prices and private market values is creating opportunities. We continue to focus on businesses with strong balance sheets, high-quality assets and sustainable cash flows that we believe are well positioned to compound value over the long term.