With a scarcity of good local assets, property investors are increasingly looking at the UK and Northern Europe
Australian property investors continue to be encouraged by valuations in the global market, with AMP Capital announcing its first US acquisition since the global financial crisis.
The AMP Capital Global Direct Property Fund, which counts man key local superannuation funds amongst its investors, announced the US$17.6 million purchase of an 11 storey, 64,000 square foot office building in the heart of Boston’s financial district.
AMP says the building, which is 81 per cent occupied, was purchased at a price 25 per cent under the price at which it last changed hands in 2007.
The Fund has been relatively quiet in the last few years, with the purchase of a Paris office property in 2011 its other significant recent purchase, but fund manager Tim Fallet says market conditions are now “opportune,” with the timing right to secure scarce assets in tightly held markets with good growth potential.
“We expect to announce further acquisitions and divestments in the next few months as we capitalize on this favourable stage in the market cycle,” said Fallet.
He said that there was limited quality stock on offer in Australia, and investors were increasingly considering offshore purchases to “complement their domestic portfolios.”
“Clients are telling us that there aren’t too many ways to access the current opportunities we’re seeing in the US and Northern European property markets.”
The increasing offshore focus for property investors comes after a spectacular 2012 for property funds, in particular the listed Real Estate Investment Trust Sector, which rebounded well after the pain of the GFC, when too much leverage combined with sliding asset values.
In 2012, the A-REIT index’s total returns were 33 per cent, compared with 20 per cent for the broader market, making it the best year since 2006.
Industry pundits are forecasting that REITs may be looking to leverage up again in 2013 to fund new acquisitions, with a Merrily Lynch analyst Simon Garing estimating that local REITs could find another $14 billion for acquisitions this year by re-gearing.