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Australian listed property trusts hit the buffers – at last

For the past five years or so, commentators have frowned at Australia’s listed property trust sector, which has consistently outperformed every other major asset class in the country, and argued that this success couldn’t last. And for the past five years they’ve been wrong.

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.

Some feel it has been a long time coming.

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