Defensive buyers help REITs outperform expectations

Although overall price returns were at minus 2 per cent, several REITs, such as Westfield Retail Trust, GPT Group, Investa Office Fund and Commonwealth Property, emerged with stronger than expected results.

One of the last trusts to report was Trafalgar, which unveiled an operating profit yesterday of $3.07 million for the year to June 30.

But it reported an after-tax loss of $3.04 million after recording net unrealised losses and impairments of $6.11 million. A 5? dividend was declared and will be paid on September 16.

The group's chief executive, Braith Williams, said the outlook for the year ahead was likely to remain cautious as investors came to grips with the impact of the proposed carbon tax and an uncertain global economic environment.

JP Morgan analysts said the defensive exposure of the trusts was behind their outperformance.

"The REITs outperformed through reporting season despite delivering a total return of minus 2 per cent, while global uncertainty saw the ASX 200 deliver a poor minus 5.9 per cent over the reporting season," it said.

Of the better performing trusts, GPT led the charge with a forecast rise of 7 per cent for its full year earnings to December 31.

Merrill Lynch's team upgraded GPT's near-term forecasts on the back of lower debt costs, cost cuts and reduced holdings in its office fund.

"We have also included in our forecasts the full 5 per cent buy-back over the course of the next 12 months. That should be supported by the sale of a half share of the MLC Centre," Merrill Lynch said.

Commonwealth Property Office Fund was up 2.2 per cent and was supported by three bits of good news: the sale of 259 George Street at a 15 per cent premium to book value; the sale of a 50 per cent interest in the 5 Martin Place development above book value; and the leasing of space to Deloitte in 225 George Street with expansion taking an extra four floors.

Investa Office Fund benefited from being lowly geared, despite delivering a result and outlook below expectations. Westfield Retail Trust's outperformance reflected its defensive nature.