IT IS no secret to investors and super fund managers that the growth of the listed property trust sector has been enormous in the past 10 years.
The inflow of funds, more than $2 billion every year, is seeing more LPTs being listed and venturing offshore to buy assets.
In its inaugural report, Ernst & Young Australia says that Australia ranks second only to the US in market size and depth of real estate investment trusts.
The global survey says that while the US is obviously the biggest REIT market, with $US395 billion ($517 billion) of market capitalisation, the Pacific, mainly thanks to the size of the Australian LPT market, remains second (albeit a distant one) at $US77 billion.
The survey, which analyses REITs in 13 countries across four regions, states that the emergence of listed REIT structures is the public face of the globalised property markets.
Ed Psaltis, a partner and head of Ernst & Young Australia’s real estate audit and transaction advisory practice, said that in addition to identifying trends for REITs in the countries surveyed, the report also highlights a significant challenge for the industry: financial comparability.
“Differing regulatory and legal frameworks, including tax and accounting standards, for example, are obvious considerations in assessing and comparing REIT markets,” Mr Psaltis said. “Measuring real financial performance, and a yardstick as to what is the most appropriate earnings measure, are the more difficult aspects.
“From Australia’s point of view, LPTs performed well over the last financial year, with an average return of 18.3 per cent, the third highest of the countries surveyed and number one among the bigger REIT markets.”
Mr Psaltis said Europe, however, was the stand-out region in terms of three-year total rate of return. The REIT legislation in the UK is due to come into force from January 1, 2007, followed shortly after by Germany.
“What this report recognises is that while the US and Australia may at present lead the way in the REIT or LPT markets, other countries are competing more strongly than ever for a slice of the booming global property market,”Mr Psaltis said.
He said the key findings in the report included that South Africa was a top performer in terms of total rate of return over three years and that Hong Kong matched the US in average volume of trade per listed REIT.
Japan was by far the largest Asian country in terms of total volume of trade.
In Australia, over the past three financial years, the stapled security has become the dominant business model for LPTs but returns over three years have not been as good as they were in some other countries.
One fund that has seen high returns is the property and investment funds management group Real Estate Capital Partners, where its flagship fund, the Real Estate Capital Partners Enhanced Income Fund, reported total returns of 9.3 per cent for the September quarter.
Performance has been in part due to an increase in the fund’s unlisted property exposure, now 10 per cent of it funds.
by Carolyn Cummins
Photo credit: ChrisGoldNY via Visualhunt / CC BY-NC
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