Hay big spender – tighten purse strings

THE year 2007 will probably mark the end of Australians spending big overseas after investors splurged a record $US22 billion – a feat unlikely to be repeated"¦ at least for a while

According to DTZ, Australian investors committed over $US22 billion to overseas property in 2007 – up from $US12 billion in 2006.

DTZ’s Asia Pacific research director David Green-Morgan said he does not expect to see this level of overseas purchasing activity by Australian investors again in 2008, given the backdrop of ongoing global financial market conditions.

Despite more than $US22 billion of properties being added to Australian property companies’ portfolio, the ASX’s latest monthly update show the market capitalisation of the A-REIT sector is down 26.8% from $135 billion in March 2007 to $99 billion in March 2008 – even though the number of listed entities has remained unchanged at 69.

Meanwhile, DTZ’s research shows the big winners in 2007 were the United States and Asia Pacific with investment in Europe falling to 13% – from 44% in 2006.

More than 60% of all Australian overseas property investment in 2007 went to the US. Two deals in the first half of 2007 dominated US investment – Centro’s acquisition of New Plan Excel Reality Trust for $US3.7 billion and a Macquarie Bank-led consortium’s acquisition of Spirit Financial Corporation for $US3.5 billion.

Centro is currently in the process of selling its assets in the US and Australia. It has been reported that Blackstone, Citadel Investment Group, Lighthouse Partners and Macquarie Group have been circling the group’s assets.

But Centro is not alone, other Australian property groups which are either pure US or have exposure to the region’s market are currently suffering on the ASX.

According to UBS, pure US property investor Tishman Speyer Office Fund is currently trading at 48.5% discount to valuation, and Reckson New York is currently trading at 53.4% discount to valuation.

And Macquarie Office Trust which has exposure to the US, is currently trading at 33.9% discount to valuation.

Trusts with exposure to Asia Pacific were not immune, Babcock & Brown Japan Property Trust is trading at 23.9% discount, Galileo Japan Trust is trading at 53.3% discount and Challenger Kenedix is trading at 48.6%.

Meanwhile, DTZ’s research shows Australian companies invested over $US5 billion in the Asia Pacific in 2007 compared to $US1.7 billion in 2006.

The biggest Asia Pacific deal was the purchase by Macquarie Global Property Advisors of two adjacent land sites in the Marina View area of Singapore for over $US1.9 billion in September and November of 2007.

Green-Morgan said the figures highlighted the growing maturing of the Asia-Pacific property market.

“The mature markets of Japan, Singapore and Hong Kong were the main attractions for Australian investors in 2007, encouraged by continuing good economic conditions in the region,” he added.

Australian Property Journal