An investment performance analysis of Portfolio Management Services Residential Portfolio by strategic property consultants Charter Keck Cramer March 2009.
"It is clear that the Portfolio Management Services portfolio has outperformed the broader Melbourne markets (both houses and flats) as represented by the REIA indices with its index value at December 2008 being 33% higher than the House index and 9% higher than the flats index."
Strategic Property Consultants – Charter Keck Cramer conducted an independent research study of Portfolio Management Services performance over a 35-year period. This study was based on purchase price, valuation and returns of a sample of 583 properties purchased by Portfolio from 1972 to the present.
The study compares the results with data from the Australian Bureau of Statistics, the Real Estate Institute of Australia, Land data and the Property Council of Australia. The main findings of this study confirm the benefits of the Portfolio acquisition strategy in the inner suburbs of a major city, purchasing properties at or below fair market value with properties capable of providing around 6 % return. Further these properties are refinanced to higher gearing levels to reflect changing property values with capital works minimized and restricted to achieving suitable standards to attract appropriate tenants and rent.
A brief summary of the research findings show:
• The average internal rate of return (IRR) across the Portfolio Management Property Portfolio assumed to be fully funded and non-geared was 12.5% p.a.
Figure 8:
• Average IRR varied between 21.4% (early 70’s) to 12.2 % p.a. (early and late 2000’s).
Figure 10:
• Compared with other asset classes, residential property has been shown as the strongest performing asset class in Australia over the long term with respect to total returns (Figure 10). Whilst Equities performed strongly over the long term, this asset class is volatile with large fall in returns most recently. Residential property has shown to deliver by far the highest returns with much lower volatility and risk.
• Portfolio Management Services residential property portfolio out-performed the broader Melbourne residential markets for both Houses and Flats by 33% and 9% respectively as indicated with the REIA Houses and Flats indices.
• The majority of individual properties acquired by Portfolio out-performed (58%) of the residential property sub markets in which they were located over the same period.
• Timing of purchase (and subsequent sales) was more important than the length of the investment,
• Volatility of returns on property purchased by Portfolio was considered low with almost 84% falling within the standard deviation.
It should be noted that the analysis of the properties purchased and managed by Portfolio Management Services (the Manager) is based on a sample of properties only and is a review of historic investment performance. This analysis does not provide forecasts regarding future investment performance nor does it suggest that the Manager will replicate historic investment performance in the future.
© (2009) Charter Keck Cramer
