Go global in REITs: Cohen & Steers
Real estate investment trusts (REIT) represent significant opportunities in global markets, according to Cohen & Steers, the biggest provider of REITs in the US.
Speaking at a recent briefing held in the Sydney offices of its Australian representative, Ambassador Funds Management, Cohen & Steers chief investment officer Joe Harvey gave an overview of the firm’s current assessment of global opportunities.
He said the Australian listed property sector was oversubscribed, with Cohen & Steers’ underweight position in US and Australian property relative to the UK and Hong Kong indicative of this belief.
Research produced by Cohen & Steers pointed to high growth prospects within the Asia Pacific region, with moderate and low prospects in North America and Europe respectively.
The key risks identified within the Asia Pacific were corporate governance and the ongoing threat of the Chinese economy overheating.
Stateside, the main threat posed is a resumption of the interest rate tightening by the US Federal Reserve, while in Europe the key risks revolved around slow growth and governments’ rejection of REIT structures.
“In our valuations, Europe is the middle of the road, it’s not as attractive as the Asia Pacific,” Harvey said.
Looking specifically at the German listed property sector, Harvey said there were significant securitisation opportunities presented by more entities selling residential properties in order to pay down debt. This is combined with German Government moves to privatise many residential apartment buildings.
Harvey described the UK and Germany as emerging REIT markets. Germany currently represents only 0.6 per cent of the Standard & Poor’s Citigroup World Property Broad Market Index, while the UK comprises 9 per cent.
For this reason, Harvey believed German listed property has considerable room to expand, particularly in light of REIT legislative reforms that are slated to take effect in early 2007.
Cohen & Steers also expected, in the medium term, that around two-thirds of public companies in the UK would convert to the REIT structure pending legislative changes flagged for January next year.
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