US real estate groups are flocking to Australia to tap a juicy source of capital: A$4bil of annual pension savings chasing property.
With 10 per cent of Australia's share market devoted to property, compared with about 2% of the US market, US real estate groups see a new wellspring of money.
The drawcard for the Americans is that Australian property fund managers value the steady income that comes from real estate, and tend to be longer-term investors than their US peers, who are more focused on capital growth.
"You have very, very knowledgeable property-centric investors, which makes this an extraordinarily attractive place to come to," said Tom Feldstein, chief executive of Tishman Speyer Australia Ltd, manager of Tishman Speyer Office Trust. Tishman Speyer, which owns iconic properties like New York's Rockefeller Center, last December became the first US group to float a trust in Australia, its only publicly-traded fund worldwide.
It raised A$520mil to buy a 45.9 per cent stake in a US$1.85bil portfolio of office buildings mainly in New York, Chicago and San Francisco in a joint venture with Singapore's Government Investment Corp Real Estate Pte Ltd (GIC) and Tishman Speyer.
It was followed by Reckson Realty Corp, which raised A$263mil in September with the float of Reckson New York Property Trust, giving Australians a 75 per cent stake in offices in and around New York, while Reckson kept 25 per cent. Now, there are companies flying over without any deals to sell, just to meet fund managers in Australia.
"To the extent a deal ever materialises, the best way for us to get execution is to build those relationships well in advance of that," said Maryland-based shopping centre group Federal Realty Inc vice-president of investor relations, Andrew Blocher.