Asia-Pacific: Australia offers a glimpse of the future
The issuers and investors building nascent Reit markets from Hong Kong to London must pause occasionally to picture what these new markets might look like in the future. What sort of issuance, innovation, consolidation and retraction might they see in the years ahead? Australia could have some of the answers. Chris Wright reports.
The Australian listed property trust (LPT) market – LPTs are not, strictly speaking, Reits, although the differences are subtle – is one of the most sophisticated listed property markets in the world. Bankers say that as much as 80% of suitable property in Australia is already securitized. It presents a useful case study in how such a market evolves over time. "We believe there is a Reit lifecycle," says Simon Jones, co-head of real estate capital at Macquarie Bank.
The Australian LPT market kicked off in the 1980s with the sort of structure typical of later Reit markets. They were listed, closed-end funds, paying out 100% of their taxable income in yield. Since their inception they have been a favourite of Australian retail and institutional investors alike: in a market that loves a good dividend (many leading blue chip stocks pay 5% or 6% yield, a rarity in other developed western markets), they offered stable income and the possibility of growth.
Early structures came and went before the market really took off in the early 1990s, as more and more companies saw the merits of removing lazy assets from the balance sheet and turning them into a popular listed vehicle.