Global property expectations revised

Instos look to sector

By Christine St Anne
Wed 16 Jul 2008

The worst in the credit and global property markets may be behind us, says a global investor.

Global real estate trusts (REITs) have traded on fear over the past year, according to LaSalle Investment Management.

Despite the fact that global real estate has delivered a negative 23.4 per cent return over the period, historically real estate stocks have done well, the investment firm said.

Overall global real estate stocks delivered 13 per cent over five years compared with global stocks which posted a 9.9 per cent return.

"Real estate fundamentals are expected to remain stable despite slowing demand in the US and Europe," LaSalle Investment Management chief executive Todd Canter said.

Despite the credit crunch, the average REIT holds 40 per cent debt to market capitalisation, Canter said.

"These vehicles are still able to access credit although their funding is more expensive than 18 months ago," he said.

Large REITs including Simon Property, ProLogis and Westfield have issued unsecured debt worth over $3.8 billion in the last two months.

At present real estate companies are well-positioned for earnings growth.

"There is now a unique opportunity to buy the best real estate companies at very good prices," he said.

Institutional investors have also adjusted their expectations towards the sector, according to Canter.

This year a sovereign wealth fund gave the firm a $500 million global real estate mandate.

"Pension funds are increasingly allocating part of their portfolios to global real estate securities," he said.

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