Australian listed property trusts hit the buffers – at last

But not any more. After a decade in which staid old property trusts beat mainstream equities time and again, the market has fallen dramatically, and rolling five-year returns from LPTs are below the broader market for the first time this century. And how: the LPT sector is down more than 25% in the three months to January 31 and logged a negative calendar year return (–8.4%) for 2007. There might be worse to come. It’s a far cry from the 34.1% the sector delivered in 2006.

A large part of the problem has to do with selling triggered by the difficulties afflicting Centro Properties Group, which in December announced that it had been unable to roll over A$1.3 billion ($1.2 billion) of soon-to-expire short-term loans, triggering a 77% fall in the stock and a suspension of applications and withdrawals. Centro itself is surviving – it announced on February 15 that much of its debt had been extended to the end of September – but the effect on the market has been profound. The LPT sector took an 11.5% hit on December 17 alone, the day of the original Centro announcement.