Looking Up From Down Under
A Report from the AFIRE/PCA Summit
Approximately 175 attendees arrived
at the Grand Hyatt Sanctuary Cove on Australia’s Gold
Coast dressed in everything from shorts to suits. This joint
meeting with AFIRE was the third in a series of annual Listed
Property Trust Leaders Summit conferences sponsored by the
newly formed Capital Markets Group of PCA, the over-arching
real estate organization in Australia. The first evening’s
reception included a wine tasting of Australian wines along
the side of a man-made salt-water beach featuring clear,
blue filtered water and no waves.
The first day’s program, which
was organized and presented by AFIRE sponsors and members,
featured a helpful dose of international investing advice,
market knowledge and US investing strategies. At dinner,
much excitement ensued from the speech by Gulf War veteran
and hero General McCaffrey as he spoke on the day that Baghdad
fell to Coalition forces. The second day’s morning
program was abuzz with the current tensions in the Australian
LPT industry as hostile takeovers, poison pills and debates
over externally and internally managed trusts dominated
the discussion. Both the “predator” and the
“stalked” of a much-publicized hostile takeover
bid appeared on the same panel. Talk of consolidation in
the industry filled the air.
The total value of the Australian
institutional grade real estate market is estimated at A$110-A$120bn.
Of this amount, the Listed Property Trusts hold 49 percent
or about A$55bn. The 1990’s have seen tremendous growth
in this sector (See
Chart 1) along with a consolidation in the number of
trusts. In the past few years investors have focused on
the LPT’s that own foreign assets. In fact, equity
raised by international LPTs over the past three years represents
48 percent of total equity raised. The first new IPO since
1999 was the Macquarie Prologis Trust. It is said that if
all of Westfield’s trusts were added together the
market value would be equivalent to the eighth largest company
in Australia.
Investors are looking at offshore
investment in property for increased returns and diversification.
The sheer weight of capital into the property sector has
forced the trusts to move overseas due to the scarcity of
Australian direct real estate product. (See
Chart 2) This projected growth in capital is primarily
due to the compulsory superannuation laws currently in effect.
The trend does not appear to be abating.
The PCA released the results of
a survey of the listed property trust industry. Much of
this information pertains to international investing and
selected questions are reproduced following this article
for the AFIRE reader’s interest.
