Global real estate investment trusts (REIT) are likely to buy properties from private real estate companies over the next few years, after raising enough capital since the start of the year to fund expansion.
"We think the next 18 months will be a very fruitful time for listed [property] companies, because they are one of the few investors in the world that have capital," AMP Capital Brookfield chief investment officer Kim Redding said yesterday.
REITs have raised about US$40 billion this year across markets in the United States, Australia, Singapore and the United Kingdom to clean up their balance sheets and still have money left to expand.
"I think there is a significant multi-year opportunity for REITs to go back on the offensive and buy property," AMP Capital Brookfield global portfolio manager Jason Baine said.
The most likely scenario is that listed property trusts will buy assets from private companies that face refinancing difficulties as their loans mature.
"It will be more public companies buying assets from private companies, and new company formation from private companies," Baine said.
"If you have a portfolio of assets right now and you're not a public [company] you are wondering, 'how am I going to address my maturities in 2010, 2011?' It's still pretty tricky.
"While a company like Boston Properties [a US-based REIT], they did a US$700 million deal overnight. That is an advantage that can't be overstretched."
But investors should not expect to see the high returns of the boom years again, Redding said.
"As investors, what do you expect from REITs? In the years that you were having 30 per cent returns, those weren't normal years. It should be between 9 per cent and 12 per cent over the longer term."
