More signs of some financial strength returning to the embattled property trust sector.
Last week it was industry major Stockland confirming that it had had a better year in 2010, with hopes for a small gain in 2011.
Lend lease, which operates in the development side of property, revealed a small gain in earnings on Monday.
Both groups’ results contained no bad news on impairment of other losses, unlike the 2008 and 2009 financial years which sent the sector reeling in a tide of red ink and forced cash raisings to stay afloat.
Yesterday, two trusts managed by the Commonwealth Bank’s Colonial First State arm revealed a similar return to health.
CFS Retail Property Trust (CFX), an owner of 25 retail properties, reported net profit of $315 million for the year to June 30, up from the very red $366.9 million loss in the 2009 financial year.
The year’s profit included a net gain on investment properties and associate revaluations of $49.2 million, and a net loss on the fair value of derivatives of $23.2 million.
A final distribution of 6.3c per security was declared, taking the full year distribution to 12.5c.
"This was a solid result despite a change in the distribution policy which came into effect on 1 July 2009, whereby the Trust’s distribution was adjusted to provide greater alignment with underlying earnings.
"The adjustment means that CFX no longer adds back the performance fee (if payable for the period) to distributable income.
"On a like-for-like basis distribution increased 3.1%. Net property income increased 10.1% to $465.7 million and on a like-for-like basis, increased by 3.5%," the fund said in yesterday’s statement.
And the fund’s manager Michael Gorman delivered a confident outlook and forecast a distribution in the range of 12.6c and 12.7c in the 2011 financial year.
"Our outlook for the Australian retail property market is that sales growth will remain below the long-term trend at around 3% over the next 12 months.
"Beyond this, a combination of high consumer confidence, a strong labour market, population growth and strength in the Australian economy is expected to return retail sales growth back to the long-term trend," the fund said yesterday.
"Our outlook for the next 12 to 18 months is positive. The strength of the Australian economy in the medium to long-term augurs well for Australian property markets and for A-REITs with proven strategies to deliver solid long-term returns for investors."
And CBD office owner Commonwealth Property Office Fund (CPA) said profit reached $114.2 million in the year to June, up from 2009’s massive loss of $543.7 million.
"The difference in the net result was primarily due to the change in the property and derivatives revaluations.
"The profit included a net loss on investment properties and associates revaluations of $27.9 million (compared to a $597.3 million loss for the previous year) and a net loss on the fair value of derivatives of $14.0 million (compared to a $68.5 million loss for the previous year).
"Distributable income was $136.2 million, compared to $147.0 million for the previous year.
"Underlying the result was a 9.9% decrease in net property income to $210.2 million primarily as a result of asset sales. On a like-for-like basis, net property income increased by 3.0%," the fund said yesterday.
A final distribution of 2.9c was declared, taking the full year distribution to 5.55c, down from 8.8c.
CPA fund manager Charles Moore said yesterday: "CPA delivered a solid result, generating a profit of $114.2 million for the 12 months to 30 June 2010, reflecting sound operating performance and a reduction in the negative impact from property and financial derivatives revaluations.
‘‘While the year ahead remains challenging, we are targeting a payout ratio of 80 per cent of distributable income, or the fund’s taxable income, whichever is the greater and expect to achieve a distribution in the range of 5.4 to 5.5 cents per unit for the 12 months ending 30 June 2011."
"A number of CPA assets recorded increases in value, reflecting a combination of leasing success, capital expenditure and an improved outlook for Australian office markets.
"Transactional activity has provided values with comparable evidence that the downward pressure on values for quality assets has eased.
"The independent valuations have confirmed that investment yields for quality assets have stabilised and in a number of instances, have firmed modestly.
"As we head into the 2011 financial year, we are well positioned to capitalise on the forecast improved market conditions," he added
Both funds will find it much easier to refinance some of their debt that falls due in 2011.
CPA securities rose 1.5c to 94.5c; CFS securities added half a cent to $1.91c.
