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REITs poised for rebound, investor says
Carolyn Cummins
June 10, 2009 - 5:49PM

Real estate investment trust prices have hit bottom and the more viable entities are tipped to become aggressive players in a new wave of mergers and acquisitions, according to a United States-based property fund manager.

Speaking from the US, Steve Carroll, senior managing director of CB Richard Ellis's (CBRE) global real estate securities division, says REITs offer historically good value after the 55 per cent fall in the sector's price globally since February 2007.

Mr Carroll was speaking at the launch of the Advance Asset Management's new retail fund that offers its retail investors exclusive access to the CBRE GRES fund, via the Advance Global Property Fund.

The Advance fund has a cornerstone investment of $69 million in the CBRE fund and has already attracted $500,000 in cash from Australian investors, through the Asgard, BT and Colonial First State platforms.

Patrick Farrell, Head of Investment Solutions for Advance said the strategic partnership is very timely and underpinned by the impressive credentials of CBRE GRES.

''While the global financial crisis has had a sharp impact on property investments and volatility is expected to continue, these extraordinary conditions create many opportunities for investors with a medium- to long-term view'' Mr. Farrell said.

Mr Carroll said the REIT sector has raised $US25 billion ($31.2 billion) globally in equity to repay debt and give themselves ready cash to buy properties that would become available over the next 12 months.

In Australia more than $5 billion has been raised in the past month by trusts planning to use the cash to retire debt and prepare balance sheets for future acquisitions.

''There is now a growing number of companies positioning their capital structures to buy what we believe will be heaps of distressed commercial real estate assets that will come to market in the coming 12 to 24 months,'' Mr Carroll said.

''We see stocks such as Westfield as strong investments (the fund holds 4.3 per cent of Westfield) and we are looking at other Australian REITs. We think Stockland is also terrific and has high hopes for the future.''

Mr Carroll said his fund was not run as a vulture or hedge fund as it bought stocks for the longer term. But he said he remained underweight in Australian REITs because many of them still had issues with large debts that they need to repay, due to their investments in non-related property, such as funds management.

He said it will take time for them to extract themselves from these issues.

Nonetheless, Australian funds had raised significant capital in recent times with some of the cash being ''dry powder'' to be used for takeover opportunities, he said.

''The REITs led the decline of the markets and will lead the recovery. And with capital markets showing signs of thawing out, there is the potential for the stronger trusts to buy both single assets of distressed entities and even the whole business.''

CBRE's global real estate securities fund has about $US1.7 billion ($2.12 billion) under management.

http://business.theage.com.au/business/reits-poised-for-rebound-investor-says-20090610-c3h8.html