Australian yields lure local listed property investors

February 1, 2016, 5:02am


Sydney, Australia. Picture: BLOOMBERG/BRENDON THORNE on BDLive

By Alistair Anderson, Business Day Live

MORE South African-listed property funds are looking to Australia for offshore expansion because of its better finance cost-to-yield spread.

CEO of JSE-listed Investec Australia Property Fund (IAPF), Graeme Katz, said on Friday that various funds and investors were looking for deals in Australia.

"Australia is a destination of choice for foreign capital. We are definitely seeing more interest in the country’s property industry," said Mr Katz.

IAPF has grown aggressively in Australia over a short period of time.

When Investec Australia Property Fund listed in October 2014, it owned only eight office and industrial buildings worth less than A$150m. The fund is now worth about A$450m and has an array of office and industrial assets. The fund is the Investec group’s first JSE-listed offshore property venture.

Growthpoint Properties, the largest South African-based South African real estate investment trust, is looking to expand its Australian footprint.

CEO Norbert Sasse said at an investor presentation in December that while the Australian market was highly competitive, it had an attractive financing cost-to-yield spread that was not evident in SA.

Evan Robins, listed property manager of Old Mutual Investment Group’s MacroSolutions boutique, said on Friday that Australia had become more attractive to investors recently.

"An attraction is that Australian property yields are relatively high, but most companies trade at a sizeable premium to net asset value," he said.

But Ma’alot Investments director Maurice Shapiro said there were some cons to investing in Australian property, the main one being that assets there may be overpriced.

"Australia looks overpriced and the economy is in a tough space, given that it is resource-backed. The Australian dollar has also performed poorly against the US dollar. So, the investment case for Australian property is poor," he said.