insto - Australian financial markets

The real estate holdings company will buy 7.5 per cent of Macquarie Office Trust and Macquarie CountryWide Trust, as well as 3.5 per cent of Macquarie Direct Property Fund, for $189 million.

Additionally, Charter will buy the management rights for the funds, as well as those of Macquarie Martin Place Trust, and Macquarie Property Income, for $108 million.

Retailers and investors grow increasingly confident about the outlook for the retail property sector, resisting signs of downturn.

According to Jones Lang LaSalle’s (JLL) Q309 statistics, the downturn is turning out to be much milder than expected.

The quarter has seen “signs of recovery in the level of retailer demand for space, a stabilisation in both vacancy and rents in most monitored markets, yields for prime assets, and growing investor confidence,” said Leigh Warner, JLL’s national retail analyst.

The AMP Capital Investor group has inked an agreement that will expand its business in Asia.

The agreement is for AMP to acquire 50 per cent of MacarthurCook Industrial REIT’s (MI REIT) management and property management companies as well as taking a cornerstone stake of up to 19.2 per cent in the Singapore-listed MI REIT. The cornerstone stake is worth up to A$42.6 million (S$54.1m). MI REIT has a property portfolio valued at approximately A$389 million (S$494 million).

Moody's Investors Service has revised its outlook for Australia's real-estate investment trusts (A-REITs) to stable from negative, given its view that fundamental credit conditions for the sector will firm over the next 12-18 months.

"There are clear signs that the business conditions for the A-REIT sector are stabilizing, with Australia's economy outperforming expectations of earlier in the year, and avoiding a recession," said Clement Chong, a Moody's vice president, on the release of Moody's update on the sector.
 

Recovery is on the cards for non-residential property market. Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors, has predicted that due to improved conditions in the market and attractive longer term return premiums, a gradual recovery in this asset sector is likely to get underway.

Since peaking in late 2007, unlisted commercial property prices have fallen by around 20 per cent with 25 to 30 per cent falls in office and industrial property and 10 to 15 per cent falls in retail property, as a result of the fallout from the global financial crisis.

Declining asset values are set to impact the ‘Australian Retail Investment Trust’ or ‘property trust’ sector as they report interim and full year earnings, says Fitch Ratings.

The rapid slide in property values appears to have slowed, but investors should not expect any sort of recovery in 2009, and possibly not until well into 2010.

Commercial property values have been under pressure through the first half of 2009. Re-pricing of risk and a weaker outlook for rental growth, as the economy slows, has seen property valuations wound back, although so far there is limited transactional evidence to support the new range of values, says David Rees, Australasian head of research for Jones Lang LaSalle.

Investors in unlisted property could be forgiven for thinking they had escaped from a rabbit hole and emerged into Wonderland during 2008. When the Global Financial Crisis cast nearly all asset classes into free fall, unlisted property markets continued to levitate regardless, reporting a positive return of 3.8 per cent for the year. The performance gap with their listed property counterparts in Australia broadened, like the smile on a Cheshire cat, to an incredible 50.4 per cent over the year.

The economic data during May provided further evidence that the economy could surprise on the upside, according to Goldman Sachs JB Were analyst Chris Pidcock. Writing in GSJBW’s “Monthly Market Review” for May 2009, he also noted: “building approvals rose and retail sales exceeded our expectations while consumer sentiment held onto recent gains. The RBA left interest rates unchanged at 3.0 per cent but retained an easing bias while the AUD continued its ascent, finishing the month at 79¢ (+6.5¢).”

The next quarter is shaping up to be an absolute watershed period for property in Australia at all levels. REITS are under ongoing earnings and balance sheet pressure, office tower prices are about to tumble, and even the humble family home is being put on the line by self-funded retirees, reports Bernard Kellerman.

Last week, a presentation by Fitch Ratings to an Australian Securitisation Forum Evening Series seminar on 29 April set tongues wagging.