By Eriko Amaha
SYDNEY (Reuters) - The Australian unlisted property market is set for a shake-up with some funds likely to go public and others taken over by listed vehicles, said a top executive at Colonial First State Global Asset Management.
The unlisted property fund sector, which is worth about A$28 billion ($22.6 billion), remains under pressure as asset values continue to fall, while listed vehicles have managed to recapitalize themselves by tapping the stock market for funds.
"Some of them may choose to actually, when the listed market gets more momentum, take those unlisted funds to the listed landscape," Darren Steinberg, head of property for Colonial First State Global Asset Management, said on late on Friday at the Reuters Global Real Estate Summit in Sydney.
"It will give them an option for liquidity through that mechanism."
Last year, financial services house AXA Asia Pacific (AXA.AX: Quote, Profile, Research, Stock Buzz) tried to list its wholesale property fund on the Australian Securities Exchange but halted the plan due to volatile market conditions.
"It's certainly something to watch in the next 12 months to 18 months. And potentially, listed funds may take over wholesale funds," Steinberg said.
Colonial First State has about A$19 billion in assets under management, including the assets it holds through listed funds like CFS Retail Property Trust (CFX.AX: Quote, Profile, Research, Stock Buzz).
Asked whether Colonial would consider listing any of its wholesale funds, Steinberg said the company was currently reviewing strategies of all its wholesale funds.
CONSOLIDATION
Mergers and acquisitions are also likely to take place in the listed space, although the timing would depend on the debt market, he said.
The investor base for Australian real estate investment trusts (REIT) has widened with more global REIT investors stepping up their presence in the market.
Australian REITS will now have to compete with nearly 250 global REITs to stay on global investors' radars, Steinberg said.
"There will be a point where you have to remain relevant to today's investors," he said. "And it's not just about scale but about scale and performance."
On the direct property market, Steinberg prefers retail assets to office buildings. Retail sales in Australia remain strong thanks partly to government stimulus spending.
Capital values for retail centers are expected to decline only 5 to 15 percent from their recent peak of March 2008 to an expected trough by March 2010, according to Jones Lang LaSalle. In contrast, capital values for office buildings are projected by LaSalle to fall by 20 to 25 percent. Continued...
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