CUSHMAN & Wakefield research analyst Laura Cummins has taken out the prestigious Australian Property Institute Project Prize for her final year thesis in which she investigated changes in A-REIT distributions over the past decade.
The Australian Property Institute Project Prize is awarded to the Bachelor of Property Economics student who performs best in the final year thesis. It is sponsored by the Australian Property Institute.
Cummins’ prize winning thesis focused on capital and cash components of dividends and the roles of Australian International Financial Reporting Standards and increased leverage in the sector.
Cummins said her interest in the topic was triggered by an uneasy realisation that many A-REITS were paying dividends sourced from revaluation gains and future cash flow projections.
“After interviewing a number of fund managers, trust managers and an equities analyst, as well as analysing financial reporting data, I found that some A-REITS were effectively paying shareholders not out of their own pocket but from debt sources, as they were relying on revaluation gains on geared assets to make distributions.
“On the surface this appeared a dangerous practice, and that danger became all too evident when the credit crunch hit. The resulting devaluations of those same assets caused gearing ratio difficulties with lenders leading to widespread capital raisings. This was at a time when competition for investors’ dollars was high and confidence in the market was low,” she continued.
“While these capital raisings served to ensure distributions could still be paid, they also diluted shareholder value at the same time,” she added.
Cummins said the A-REIT sector has since learnt an important lesson and have since changed their distribution policies to only allow the distributions to be paid from cash profits instead of shifts in asset valuations.
Cummins joined the Cushman & Wakefield in October last year and aims to progress to a role in capital markets and REIT transactions.
Australian Property Journal
