Exclusively designed for the CoreSeries Portfolios on BT Panorama, the fund is structured as a separately managed account (SMA) solution. Currently, BTIS has in excess of AU$1 billion in FUM as of May 2021 across multiple GREIT strategies allocated to Principal.

Commenting on the new mandate, Principal Global Investors Managing Director and Head of Australia Helen de Mestre said the recent GREIT rally indicates the strong outlook for the sector in line with the global economic recovery.

“We’re delighted to be working with BTIS, whom we have a long-standing relationship with, in order to service retail clients,” Ms. de Mestre said. “Our investment philosophy focuses on quality and growth with a strong emphasis on thematic tailwinds. Global listed property remains an attractive, risk adjusted investment opportunity as the structural challenges in the sector (as seen through the significant dislocation in GREIT valuations in the past year) provides a perfect market for active managers to capture alpha as part of a diversified portfolio.”

The Principal Global Real Estate Securities strategy aims to outperform the FTSE EPRA Nareit Developed (Net) Index and is focused on exploiting mispricing at a stock level by conducting detailed, bottom-up fundamental research and identifying where expectations differ from consensus. This process results in a portfolio with quality names that produce superior net operating income, net asset value growth, and capital appreciation.

BTIS Head of Equities James McSkimming said, “Our partnership with Principal exemplifies our commitment to having managers that bring differentiated characteristics suited to the single manager profiles like the fund.”

CoreSeries offers six objective based portfolios designed to meet the needs of a wide range of clients and aims to offer access to quality investments in a transparent and attractively-priced structure.

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Todd Kellenberger

Throughout last month’s persistent volatility and the continued uncertainty of COVID-19, the defensive attributes of REITs could help them stand up over the long term, according to Principal Real Estate Investors.

Speaking on a call to investors, Shern-Ling Koh, CFA and Todd Kellenberger, CFA from Principal Real Estate Investors, provided a Global REIT market update, the team’s current outlook, as well as the investment opportunities and risks they believe investors should focus on.

According to  Shern-Ling Koh, portfolio manager, real estate securities, Asia generally, has held up relatively well, but  Australia has been hit harder than most.

“Asia has held up quite well in this bear market, with REITs displaying their typical defensive characteristics going into a period of uncertainty, until a week or two ago when there was a sharp collapse.

“This sharp drop was in line with people selling bonds, forced deleveraging on many fronts. This selling off had a material impact on REITs. Australia was impacted hardest in the region, down almost 50% in US dollar terms year to date, while Hong Kong has held up the best down 23%,” said Mr Koh.

Mr Koh said the predominance of retail has been a factor in Australia’s performance.

“Almost 50% of the AREIT benchmark is comprised of retail REITs. Retail has been under pressure in Australia for quite a while, just like retail in many other developed markets. As Australia’s has a commodity-based economy and as demand collapses globally, that’s not great for the market.

“Australian REITs are stapled securities and in times of uncertainty, people start worrying about the earnings from the development component.”

Todd Kellenberger, client portfolio manager, real estate securities told investors that COVID-19 is a human and economic crisis, but not another GFC:

“In the REIT market, we are seeing a differentiation in return between sectors, rather than an across-the-board fall as seen in the GFC. This time around we are dealing with a much healthier banking system; we are dealing with a credit market situation that overall has not, especially in real estate, taken unnecessary risks and engaged in over-leveraging, and it’s worth noting is that the average REIT leverage ratios were meaningfully higher pre-GFC than they are today,” Todd added in reference to the fall from >40% to 30-35% on average.

According to Mr Kellenberger, the effect of social distancing has hit the property sector hard, causing a decline in retail foot traffic, and high hotel and office vacancies.

“The impact on the office sector will vary by country, depending on the length of average lease periods and how long the lock-downs continue. There will be tenants that don’t survive this, it’s just a question of how many. On a macro level there are the logistical challenges of completing due diligence, tenants are pausing leases and lenders can’t underwrite loans without accessing the property,” said Mr Kellenberger.

In conclusion, Mr Kellenberger said he thought REITs could perform over the long-term.

“Going into 2020 we had a medium to long term view, focusing on structural growers and unique offerings. The duration of the virus is uncertain, and the future is murky. However, there’s many areas in REITs where things can turn out much better than in the GFC.”

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Jennifer McConkey

Principal Real Estate Investors is pleased to have received an overall A+ score on the annual Principles for Responsible Investment (PRI) survey, as well as “Green Star” and “4-star” ratings on two funds by GRESB, the global ESG benchmark for real estate assets.

These awards highlight Principal Real Estate Investors integration of environmental, social, and governance (ESG) considerations into investment practices. Principal Real Estate Investors’ continued recognition by these industry benchmarks demonstrate its commitment to asset management and fiduciary governance, and the pursuit of positive financial and environmental results for our clients.

In Australia, the Principal Global Investors team manages over A$3.4b in real estate for Australian clients.

PRI

For the third year in a row, Principal Real Estate Investors earned an A+ rating, the highest possible, from the PRI Direct Property Assessment, outperforming peers in all 7 Direct Property sections. Principal Global Investors earned an overall A ranking for Strategy and Governance and continues to receive strong scores in ESG based on the 2019 PRI Assessment Report.

GRESB

Two funds from the 2019 survey, the Principal Real Estate Investors’ core and core-plus private real estate equity funds achieved “Green Star” and “4-star” ratings. This marks the fourth consecutive year Principal Real Estate Investors has received 4-star ratings for these funds, placing them among the top 40% of GRESB participants worldwide1. Both funds placed in the top 15 of their peer group, outperforming peers on 6 out of 8 GRESB aspects, and received a perfect score in four GRESB aspects (Management, Policy & Disclosure, Risks & Opportunities, and Stakeholder Engagement).

Each year GRESB assesses and benchmarks the ESG performance of the real estate investment sector worldwide and monitors industry progress towards global sustainability goals. GRESB assessments are guided by what investors and the industry consider to be material issues in the sustainability performance of real estate assets, including information on energy and water consumption, green building and energy certifications, sustainability risk assessments, governance, and stakeholder engagement.

“Changing tenant and market preferences, emerging technologies, climate risks, and the constant pursuit of cost efficiencies require a strategic environmental, social, and governance (ESG) response,” said Jennifer McConkey, senior director, operations and sustainability, Principal Real Estate Investors. “Through our continued success and focus on material ESG factors, we are better equipped to manage risk, identify new opportunities, and fulfil client objectives. We are pleased to be recognized for our ongoing efforts”

About the Pillars of Responsible Property Investing Initiative

The Pillars of Responsible Property Investing (PRPI) is the overarching environmental, social, and governance initiative undertaken by Principal Real Estate Investors and its property management partners. The PRPI initiative seeks to reinforce the social and economic vitality of markets where Principal Real Estate Investors invests, manage risk, enhance transparency, and raise each property’s competitive stature through improved financial and environmental performance. Through the PRPI initiative, Principal Real Estate Investors has reduced energy use by 18.5% since December 2008, equating to a cumulative $52.5 million in energy cost savings. 89% of Principal Real Estate Investors’ office properties are green certified (LEED and/or ENERGY STAR certified).

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