Verwer: Australian REITs Have Reinvented Themselves
Australian REITs have reinvented themselves over the past two years, says Peter Verwer, chief executive of the Property Council of Australia.
"Gearing levels are down. There has been a refocusing on passive income streams and the domestic market. So the international exposures have been re-examined," Verwer says. "REITs have become a defensive stock again and they are true to label."
Understandably, Verwer says capital management has been a major focus of Australian REITs.
"Balance sheets, by and large, are very healthy," he says. "That is why we have seen REITs outperform the general market."
Recently there has been an influx of foreign capital, particularly from Asia, into Australian REITs. Verwer says he expects this trend to continue. He says it is a win-win in that it provides the REITs a chance to raise money at cheap rates internationally, and investors get a 7 percent to 8 percent yield.
Looking ahead, Verwer says the biggest challenges ahead for Australia's listed property market are market confidence, finance issues and concerns about a double-dip.
"This year began in a very confident mode. Most analysts thought that the worst was behind us," Verwer says, adding that Australia's economy held up much better than most. "However, starting in March and April, the uncertainty that has flowed through from Europe and the United States means that there is less confidence now than there was at the beginning of the year."