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An A-REIT is a listed property trust that is professionally managed either by an external party or by internal staff within a related corporate structure which is known as a stapled entity. 
A payout ratio is the proportion of earnings paid out as distributions to unit holders in a trust or dividends to share holders of a company. 
Among the benefits of investing in an A-REIT is the higher payout ratio compared with broader listed equities. A-REITs have a pay-out ratio mostly ranging between 75% and 100%. This contrasts to the broader equities payout ratio of around 50%, although with significant variation. 
Trusts have limited discretion about the share of earnings paid to unit holders. There are no prescribed minimum distribution rules. Taxation of Trusts means that close to 100% of earnings are distributed otherwise tax at the highest marginal rate is payable. Some income may be retained in order to meet capital expenditure requirements. 
A company, or corporate component of an A-REIT, can pay as much or as little of its earnings as it elects. This explains why the externally managed A-REITs will normally have a higher pay-out ratio than a stapled A-REIT. 
The A-REIT sector currently has an overall average earnings pay-out ratio of 81%. The average payout ratio of the externally managed A-REITs is 92%. The average for the internally managed stapled A-REITs is 72%. 
By 2007, the average A-REIT payout ratio had escalated to 101%. Paying out more than income earned is an unsustainable proposition and relied on recognising and paying out growth in the fund’s capital value. This was achieved by increasing gearing. This increased gearing was subsequently exposed as capital values fell during the financial crisis.
Payout ratios were reduced in 2010 and 2011 to preserve cash and to assist in rebuilding balance sheets at a time when A-REIT performance was poor. Going against this trend is Westfield Retail Trust, which is increasing its payout ratio from 90% to 100% from this year, leaving no room for any capital expenditure from earnings. Capital expenditure is essential to maintain the appeal of retail assets in particular. This increase in the payout ratio has not met with broad support.
 Mark Wist is senior asset consultant at <a href="https://www.atchison.com.au/" title="Atchison Consultants" target="_blank">Atchison Consultants</a>.
 
 
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markwist-Vaq6S8Xoby

What A-REIT payout ratios can mean for capital expenditure

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The market capitalisation of <country-region><place>Australia</place></country-region>’s listed A-REIT sector is $75 billion and comprises 54 companies. Of these, 20 are included in the A-REIT 300 Index. The total market capitalisation of these 20 A-REITs is $65 billion, or 86% of the total. 
The A-REIT sector is further comprised of four sub-sectors. The diversified sub-sector contains A-REITs such as GPT, Stockland and Mirvac. These funds comprise assets that include any combination of retail, office and industrial and may also have significant exposure to other asset classes such as residential development or retirement. The retail sub-sector is dominated by the two <city><place>Westfield</place></city> entities, Westfield Group and Westfield Retail Trust, which together comprise 83% of the retail sub-sector and 39% of the broader Index. The office and industrial sub-sectors each comprise 8% of the Index, as shown in chart 1.
<img src="/images/stories/wistfeb281.png" width="470">
 The office sub-sector outperformed on a total return basis in 2011, as shown in chart 2. While all office A-REITs provided positive total returns, Charter Hall Office REIT was the strongest performer driven largely by the expectation of privatisation. The 2011 retail sub-sector total return was driven by Westfield Group’s underperformance as American consumers slowed spending and muted rental growth prospects in its domestic portfolio weighed heavily.
<img src="/images/stories/wistfeb282.png" width="470">
The prognosis for A-REITs in 2012 is positive. Partial closure of a persistent and material gap between price and underlying asset values will provide positive returns. Diversified A-REITs with portfolios aligned to the residential markets are expected to provide positive returns commensurate with the ongoing supply shortfall and the anticipated modest recovery in housing markets later in 2012. Net office space absorption in a market without excess vacant space is expected to provide positive growth among the office A-REITs.
<table border="0" cellspacing="0" cellpadding="0" width="413"><tbody>
<tr>
<td width="81" nowrap valign="bottom">
 
</td>
<td width="216" nowrap colspan="3" valign="bottom">
Total Returns - A-REITS 2011
</td>
<td width="52" nowrap valign="bottom">
 
</td>
<td width="65" nowrap valign="bottom">
 
</td>
</tr>
<tr>
<td width="81" nowrap valign="bottom">
 
</td>
<td width="94" nowrap valign="bottom">
A-REIT Index
</td>
<td width="79" nowrap valign="bottom">
Diversified
</td>
<td width="42" nowrap valign="bottom">
Retail
</td>
<td width="52" nowrap valign="bottom">
Office
</td>
<td width="65" nowrap valign="bottom">
Industrial
</td>
</tr>
<tr>
<td width="81" nowrap valign="bottom">
Sub-sector
</td>
<td width="94" nowrap valign="bottom">
-7%
</td>
<td width="79" nowrap valign="bottom">
2%
</td>
<td width="42" nowrap valign="bottom">
-9%
</td>
<td width="52" nowrap valign="bottom">
22%
</td>
<td width="65" nowrap valign="bottom">
-5%
</td>
</tr>
</tbody></table>
 
Retail A-REIT performance will be dominated by the Westfield entities. Retail turnover growth is muted. Rental growth in <country-region><place>Australia</place></country-region> will be negatively impacted but will remain positive as a consequence of the quality of the underlying portfolios. Westfield Group will continue to recycle capital and redevelop assets to support security price growth.
Industrial A-REIT performance will be determined by Goodman Group, with positive prospects despite its exposure to European development activities.
 Mark Wist is senior asset consultant at <a href="https://www.atchison.com.au/" title="Atchison Consultants" target="_blank">Atchison Consultants</a>.
 
 
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Office A-REITs outperformed all other sectors in 2011 

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Income from a property investment is generated through the receipt of growing rent secured by a lease contract. The variability of income is low. Earnings in Australian real estate investment trusts from additional sources, including property development and funds management, dilute this stability. 
Property income exposure within an A-REIT portfolio can be enhanced by selecting those A-REITs that reflect these characteristics of property. Up until the onset of the GFC, the use of gearing increased reflecting the relatively low cost and ready availability of debt. This exacerbated the steep rise and subsequent decline in market capitalisation of A-REITs. 
In the four years leading up to December 2007, average A-REIT price performance of 9.1%  per annum reflected using increased leverage, acquiring overseas properties and higher valuations on fund management businesses. In the four years to December 2011, the average price fell by 22.5% per annum. By contrast, the average annual income return for the four years to December 2007 was 6.6% per annum compared with 7.1% per annum for the subsequent four years to December 2011. 
Not only was there a stark contrast in performance, volatility increased significantly as market prices and sentiment deteriorated. The magnifying impact of excessive gearing was evident in performance between the two periods. Volatility of return increased from 11.6% per year in the four years to December 2007 to 33.1% per year in the four years to December 2011. Annual volatility of income returns decreased from 3.5% per year to 2.6% per year between the same two periods. 
The income generated by property is relatively stable. The introduction of alternative sources of income including development profit, transaction and fund management fees shifted the characteristics of an A-REIT investment away from property fundamentals and increase volatility of returns. By focusing on contracted rental income, the business risks and associated volatility of return of the investment can be reduced. Imprudent gearing will magnify volatility of earnings and returns.
Mark Wist is senior asset consultant at <a target="_blank" title="Atchison Consultants" href="https://www.atchison.com.au/">Atchison Consultants</a>.
 
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Income in A-REITs is the essential attribute of property investment

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While the total return for the A-REIT sector was -1.6% in the 2011 calendar year, it outperformed the broader Australian equity market, which recorded a -11% return. A-REITs are now regaining some of the defensive characteristics they traditionally exhibit. 
Renewed optimism is occurring. It is driven by repaired and relatively healthy balance sheets. Sector gearing now averages approximately 28%, down from 37% in 2006. As current debt facilities expire over the course of this year, resetting these facilities at the lower interest rates will reduce interest payments. This will improve net earnings, just the same as any household budget with a mortgage. 
A-REITs trade at a near 10% discount to their net tangible assets (NTA). Some A-REIT managers such as Stockland and GPT are undertaking share buy-back schemes in order to boost their NTA. These buy-backs are being funded by targeted property asset sales at or above NTA. The net proceeds are then used to buy back their own discounted shares. 
Mergers and acquisitions is a theme that will feature this year. Charter Hall Office Trust will start the corporate activity, with a unit holder vote expected to ratify the privatisation of the trust in March. <country-region>Singapore</country-region>’s GIC and <country-region><place>Canada</place></country-region>’s Public Sector Pension Investment Fund are the investors. Another potential candidate for corporate activity is the newly revitalised Centro Retail Australia Trust, which is offering a prospective 6.8% yield on a portfolio of domestic retail assets held under a new structure which is trading at a 23% discount to NTA. 
The persistent discount between market prices and NTA is encouraging this corporate activity. This supported by the opportunities available to acquire institutional grade real estate at a discount. An additional benefit is the stamp duty saving over acquiring the assets outright. 
Reduced interest rates, prevailing discounts to NTA and repaired balance sheets provide solid prospects for A-REITs in 2012.
Mark Wist is senior asset consultant at <a target="_blank" title="Atchison Consultants" href="https://www.atchison.com.au/">Atchison Consultants</a>.
For more forecasts for what 2012 has in store for our property markets, <a href="http://propertyobserver.com.au/ebooks/free-ebook-property-forecasts-for-2012" target="_blank">download our free eBook</a>.
 
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Solid prospects for A-REITs in 2012

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The property funds management industry has undergone significant change over the past three years as a result of corporate activity and restructuring. While the highly leveraged position of several funds caused distress and ultimately failure such as those run by Allco and Babcock &amp; Brown, some funds have been subsumed by competitors or new entrants. Other fund managers have elected to strategically exit the industry such as Westpac and <place>Macquarie</place>.
Corporate activity in the unlisted retail property fund industry has been substantial. Table 1 shows the ranking of the five syndicate and unlisted property trust managers with highest funds under management in each of 2008 and 2011. 
Table 1 - Ranking of Property Syndicate and Unlisted Retail Fund managers
<table border="0" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td width="55" valign="top">
Rank
</td>
<td width="84" valign="top">
2008
</td>
<td width="144" valign="top">
Assets ($m)
</td>
<td width="132" valign="top">
2011
</td>
<td width="144" valign="top">
Assets ($m)
</td>
</tr>
<tr>
<td width="55" valign="top">
1
</td>
<td width="84" valign="top">
Centro
</td>
<td width="144" valign="top">
5,590
</td>
<td width="132" valign="top">
Centro
</td>
<td width="144" valign="top">
3,790
</td>
</tr>
<tr>
<td width="55" valign="top">
2
</td>
<td width="84" valign="top">
Multiplex
</td>
<td width="144" valign="top">
2,861
</td>
<td width="132" valign="top">
Charter Hall
</td>
<td width="144" valign="top">
1,448
</td>
</tr>
<tr>
<td width="55" valign="top">
3
</td>
<td width="84" valign="top">
Becton
</td>
<td width="144" valign="top">
2,127
</td>
<td width="132" valign="top">
Orchard
</td>
<td width="144" valign="top">
1,424
</td>
</tr>
<tr>
<td width="55" valign="top">
4
</td>
<td width="84" valign="top">
Mirvac
</td>
<td width="144" valign="top">
1,372
</td>
<td width="132" valign="top">
Australian Unity
</td>
<td width="144" valign="top">
1,292
</td>
</tr>
<tr>
<td width="55" valign="top">
5
</td>
<td width="84" valign="top">
<place>Macquarie</place>
</td>
<td width="144" valign="top">
1,367
</td>
<td width="132" valign="top">
APGF
</td>
<td width="144" valign="top">
1,221
</td>
</tr>
<tr>
<td width="55" valign="top">
 
</td>
<td width="84" valign="top">
 
</td>
<td width="144" valign="top">
45%
</td>
<td width="132" valign="top">
 
</td>
<td width="144" valign="top">
51%
</td>
</tr>
</tbody></table>
Source: PIR 
Since 2008, Multiplex has sold its retail funds management business to the Canadian Brookfield Asset Management; Centuria and 360 Capital Management split the Becton funds between them; Mirvac first acquired both PFA and Domaine, then sold its retail funds management business to APGF; and Macquarie sold its retail funds management business to Charter Hall. Centro has undertaken a restructure of its Australian assets and funds into a new listed entity, Orchard is seeking a corporate solution and Australian Unity has acquired retail property fund management rights from both Westpac and Investa. 
The performance of the industry is also reflected in the change in the respective size of the industry. In 2008, funds under management totalled $18.5 billion. By 2011, asset sales, fund closures and asset write-downs left the industry with $13.3 billion, a reduction in size of 28%. The assets controlled by Centro in the unlisted property funds industry have been reclassified into the A-REIT industry, further reducing the size of the unlisted industry. 
Despite Westfield splitting out its new Retail Trust and the strategic exit from property fund management by ING, the A-REIT industry has experienced comparatively little change on its leader-board, with only one new name in the top five since 2008 as a consequence of the decision by Macquarie to exit property funds management. 
Table 2 - Ranking of A-REITs
<table border="0" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td width="52" valign="top">
Rank
</td>
<td width="104" valign="top">
2008
</td>
<td width="144" valign="top">
Assets under management  ($m)
</td>
<td width="108" valign="top">
2011
</td>
<td width="144" valign="top">
Assets under management  ($m)
</td>
</tr>
<tr>
<td width="52" valign="top">
1
</td>
<td width="104" valign="top">
<place><city>Westfield</city></place>
</td>
<td width="144" valign="top">
51,241
</td>
<td width="108" valign="top">
<place><city>Westfield</city></place>
</td>
<td width="144" valign="top">
50,133
</td>
</tr>
<tr>
<td width="52" valign="top">
2
</td>
<td width="104" valign="top">
<place>Macquarie</place>
</td>
<td width="144" valign="top">
16,261
</td>
<td width="108" valign="top">
Stockland
</td>
<td width="144" valign="top">
14,544
</td>
</tr>
<tr>
<td width="52" valign="top">
3
</td>
<td width="104" valign="top">
GPT Group
</td>
<td width="144" valign="top">
13,967
</td>
<td width="108" valign="top">
Colonial
</td>
<td width="144" valign="top">
12,179
</td>
</tr>
<tr>
<td width="52" valign="top">
4
</td>
<td width="104" valign="top">
Centro Group
</td>
<td width="144" valign="top">
13,927
</td>
<td width="108" valign="top">
Centro Group
</td>
<td width="144" valign="top">
11,058
</td>
</tr>
<tr>
<td width="52" valign="top">
5
</td>
<td width="104" valign="top">
Stockland
</td>
<td width="144" valign="top">
13,700
</td>
<td width="108" valign="top">
GPT Group
</td>
<td width="144" valign="top">
9,752
</td>
</tr>
<tr>
<td width="52" valign="top">
 
</td>
<td width="104" valign="top">
 
</td>
<td width="144" valign="top">
53%
</td>
<td width="108" valign="top">
 
</td>
<td width="144" valign="top">
67%
</td>
</tr>
</tbody></table>
Source: PIR 
Over the three-year period, total assets in the A-REIT sector reduced by 20% to $129 billion, but the proportion of the assets held by the five largest managers increased significantly. This can be largely attributed to the dominance of Westfield, which increased its share of the A-REIT’s assets from 25% in 2008 to 34% in 2011. 
Corporate activity, strategic fund manager exits and excessive leverage, some culminating in corporate failure, have all translated into significant changes in the property funds management industry, particularly in the unlisted property sector. Following this shakedown, a more stable 2012 is in prospect for the property funds management industry. The enduring value of property investment is derived from the underlying assets which provide the return performance notwithstanding the overlay of gearing and fund strategies.
Mark Wist is senior asset consultant at <a target="_blank" title="Atchison Consultants" href="https://www.atchison.com.au/">Atchison Consultants</a>.
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Listed property trust industry should be more stable in 2012

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Ownership of property provides investors with an interest in its net income and affords prospects of capital appreciation through improvements in that net rental income generated and any positive changes in capitalisation rate. Investment into an Australian listed real estate investment trust (A-REIT) provides similar entitlements on a proportional basis, providing an efficient structure for property ownership and transactions. 
Income attributes from A-REITs can vary depending on the source and nature of the income. A conservative A-REIT will derive its revenue from a high proportion of contracted rental income. Other A-REITs supplement earnings with corporate activity such as property development; property management; asset management; fund management; fees from transactions; and leasing services. 
But with this higher return generated by profit comes higher risk. As a trust can’t undertake profit-making activities in its own right, an associated company is “stapled” to the trust to undertake the corporate activities. In this way, these fees and profits are retained within the wider entity (the trust component “stapled” to the company component) rather than being paid to a third party.
Examples of these stapled entities include Mirvac, Charter Hall Group and Stockland. Each of these A-REITs generates a proportion of its overall revenue from rental collection from the effective ownership of property and another portion from corporate activities such as property development etc. While both Mirvac and Stockland have commercial portfolios, both are particularly active in the residential development sector while Charter Hall is focused on the commercial property sector.
<city><place>Westfield</place></city> has two entities listed on the Australian Securities Exchange (ASX), Westfield Group and Westfield Retail Trust. The group is a stapled entity with a significant portfolio of properties in Australia and in overseas markets such as the Unites States and United Kingdom. It undertakes property development, predominantly of properties in its own portfolio, and also funds management and other corporate activities. The trust simply holds a portfolio of retail properties in Australia and New Zealand, which is managed for a fee by the Westfield Group. 
Property development by its nature involves uncertain outcomes. Risk can be ameliorated by the use of fixed-price construction contracts and by pre-leasing or pre-selling components of a proposed development, but rarely is all risk mitigated, such as construction delays caused by inclement weather. This variability in the profitability of its activities can be beneficial or detrimental to overall entity earnings, however A-REITs with corporate earnings are often associated with a higher earnings growth profile. Within the corporate earnings component, property development is a higher risk activity than funds management. 
In essence, the income generated by property is relatively stable. The introduction of alternative sources of income including development profit, transaction and fund management fees can shift the characteristics of an A-REIT investment away from underlying property fundamentals and increase income volatility. This may bring a stronger earnings growth profile to compensate for additional risk. Careful examination of the composition of earnings is warranted prior to investment – no two A-REITs are the same.
Mark Wist is senior asset consultant at <a target="_blank" title="Atchison Consultants" href="https://www.atchison.com.au/">Atchison Consultants</a>.
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A-REITs with higher potential returns come with higher risk

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Net tangible asset (NTA) represents the value of the underlying property assets in an A-REIT and is expressed as a dollar amount per security. A price discount to NTA implies that the security can be purchased on the exchange for less than the value of the underlying real estate held by the A-REIT. 
At its peak in March 2007, the sector recorded an average premium to NTA of more than 80%. In May 2009, that average had fallen to a 33% discount. This fall was caused in part by high gearing exacerbating falling property values as a consequence of the GFC, the short supply of credit facilities to refinance expiring debt, a reduction in the valuation of management entities, questions about the effectiveness and appropriateness of strategies implemented by management in the years leading up to the GFC and concerns about the sustainability of asset valuations on balance sheets. 
The average discount to NTA for the sector is now -11%. 
Gearing in the sector is now a more manageable 30% and credit availability is improving, as demonstrated by the $1.27 billion bi-lateral bank facility recently secured by Westfield Retail Trust. Occupancy rates have improved and rental growth has some positive momentum. The 2011 half-year reporting season confirmed that asset values for quality properties are no longer falling with some beginning to rise. Recent A-REIT asset sales at or at a premium to book value suggest that balance sheet valuations are reasonable. Recent examples include the sale of Stockland’s 50% interest in 52 Martin Place, Sydney at a 2.7% premium to book value and the sale of 259 George Street, Sydney by Commonwealth Office Property Trust at a 15% premium. 
Strategies are now largely focused on domestic activity and development losses have worked their way out of the system.  The management structures of some A-REITs including GPT, Centro and Westfield have undergone substantial change in the past two years and aside from investor rebuke over the Dexus remuneration report, this A-REIT AGM season has so far been relatively uneventful. 
The gap between NTA and security prices may well now start to close as a consequence of increased investment into the A-REIT sector taking advantage of the prevailing NTA discount. This inward investment, including the buy-back activities of groups such as GPT, Stockland and Commonwealth Office Fund should drive prices up over time to meet NTAs.
Mark Wist is senior asset consultant at <a target="_blank" title="Atchison Consultants" href="https://www.atchison.com.au/">Atchison Consultants</a>.
 
 
 
 
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Why the discount to net tangible asset in A-REITs should disappear

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Elevated gearing in A-REITs such as Macquarie Countrywide and ING Industrial Fund and the exuberant entry into foreign markets by A-REITs such as the Centro Properties Group and Valad Property Group caused significant damage to many A-REIT balance sheets. These imprudent strategies led all four of these A-REITs to be taken over or sold into other entities.
The expansion into foreign markets was designed to capture growth opportunities outside <country-region><place>Australia</place></country-region> in addition to the benefits of diversification into markets with fundamentally different underlying economic and social drivers. The low cost of debt capital in those overseas markets had encouraged acquisitions of assets and portfolios of assets. The A-REITs bought into markets that were characterised by rising asset values, and when debt availability dried up, asset values dropped substantially. A-REITs were then forced to raise equity to restore basic lending covenants and asset sales were effected to restore balance to balance sheets.
The poor outcome for the A-REITs that did not implement this strategy appropriately damaged the investor sentiment which had supported their price growth in the mid-2000s, as noted in Figure 1.
<img src="/images/stories/wistoct20.gif">
The 70% price drop across the board between October 2007 and March 2009 was testament to the damage caused by the unavailability of credit in the strategies implemented over the four years prior. In the two and a half years since that time there has been 35% price recovery as A-REITs regain ground, but they remain 59% below their 2007 peak. A-REITs such as Mirvac, Multiplex and GPT progressively withdrew from overseas markets signalling a shift in focus back to the domestic market. <city w:st="on"><place w:st="on">Westfield</place></city> and Goodman Group remain substantially invested in overseas markets as a core part of their investment strategies. 

The lessons learnt from recent experience include the importance of understanding property and its risks in overseas locations in its local context, as property is priced in accordance with local conditions. Associating with local partners who demonstrate aligned investment philosophies is also a critical criterion for successful overseas investment.

Mark Wist is senior asset consultant at <a href="https://www.atchison.com.au/" title="Atchison Consultants" target="_blank">Atchison Consultants</a>.
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A-REITs recovering from foreign investment gambles

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Debt is an essential component of A-REIT balance sheets. An A-REIT can increase its returns by employing debt secured against the value of its underlying real estate, a technique known as leverage or gearing. The effective management of debt is an essential skill in the effective management of an A-REIT.
Until the onset of the GFC, the use of gearing was stimulated by the relatively low cost and availability of debt capital, which enabled an increase in A-REIT earnings by acquiring positively geared property. However, excessive levels of gearing magnified the steep decline in asset values during the GFC.
In 2006, the A-REIT sector, as represented by the S&amp;P/ASX 300 A-REIT Index, was geared to 37%. This figure is now a more conservative 30%, lowered by a combination of asset sales and recapitalisation of balance sheets through the raising of new equity capital. The interest coverage ratio, or the ratio of income to interest payable on debt, has increased from 3.1 times in 2006 to a relatively healthy 3.9 times today, in line with the lower level of debt employed in the sector.
A-REITs tend to split their debt between fixed-rate and floating-rate facilities. The current average is 69% fixed, giving some degree of interest rate certainty. Much of this debt comes from the banking sector which holds about 50% of all A-REIT debt, public markets holding a further 40% and private lenders which holds the balance.
A-REITs range widely in their use of gearing. Goodman Group employs a gearing level of 36% while Westfield Group also carries relatively high gearing of 40%. Both these groups incorporate significant development operations. Others, such as GPT and Westfield Retail Trust, carry more conservative gearing of just 23% and 21% respectively.
Gearing must be appropriately structured and managed, and set in a portfolio that can sustain it. The consequences of excessive gearing can be disastrous, as demonstrated by A-REITs such as <a target="_blank" href="https://www.propertyobserver.com.au/industry-news/centro-says-it-must-restructure-or-fail/2011082951331">Centro, which crashed after being unable to refinance the debt it had amassed to fund acquisitions.</a>
Mark Wist is senior asset consultant at <a target="_blank" title="Atchison Consultants" href="https://www.atchison.com.au/">Atchison Consultants</a>.
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The place for debt in A-REITs

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As recently as 2009, 46% of the real asset holdings of Australian real estate investment trusts (A-REITs) were held in overseas markets, predominantly in the US.
Investing outside <country-region>Australia</country-region> had become more common as property assets became more expensive in <country-region><place>Australia</place></country-region> and overseas assets represented diversification benefits. Interest was stimulated by the relatively low cost and availability of capital. Centro exemplified the aggressive debt-fuelled expansion strategy by acquiring three US portfolios for more than US$10 billion in the 18 months to February 2007. 
However, as the GFC unfolded, A-REIT investor sentiment turned against overseas asset holdings as prices collapsed. Wide-scale withdrawal back to <country-region><place>Australia</place></country-region> was undertaken. This was achieved by sale of both portfolios of assets and investment management entities.Significant losses were incurred as a result.
Companies no longer listed in Australia include the failed American and European Rubicon Funds and Macquarie DDR Trust, which held a portfolio of American community shopping centres. It was acquired by American EPN Group this year. 
Overseas assets now represent approximately 30% of real assets held. 
Westfield responded to the market by splitting some of its Australian and New Zealand assets into a new externally managed pure A-REIT in late 2010 while the balance of the international assets sit inside the larger Westfield Group alongside the funds management company. 
While the Australian property market represents only approximately 2% of the global direct investment property market, Australian investors are wary of further overseas exposure without a comprehensive portfolio strategy and appropriate, well-considered allocation policies applied by experienced global REIT managers.
Mark Wist is senior asset consultant at <a href="https://www.atchison.com.au/" title="Atchison Consultants" target="_blank">Atchison Consultants</a>.
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Why Australian REIT investors are looking closer to home

Buyers considering a residence at boutique Gordon townhouse development <a href="https://www.apartments.com.au/new-townhouses/lume-gordon-43-47-dumaresq-street-gordon-nsw-2072">Lume</a>&nbsp;now have another reason to bring forward their decision.

For a limited time, purchasers of a residence at Lume will receive a BMW iX3 50 electric SUV, valued at more than $120,000, as part of their purchase. The offer is designed to add value for buyers while complementing the lifestyle envisioned for the architecturally designed Upper North Shore development.

Scott Timmins, Development Manager at <a href="https://www.apartments.com.au/developers/winim">WINIM</a>, said the partnership was created to provide buyers with a compelling reason to act.

"In today's market, buyers need a compelling reason to act now, and the BMW partnership was designed to create that catalyst. We wanted to add genuine value for our future purchasers. Choosing the all-electric BMW iX3 50 also reflects the values behind LUME, forward-thinking design, innovation and a more sustainable way of living. It's a premium incentive that complements the lifestyle our buyers aspire to and rewards those who commit early."

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Delivered by WINIM in partnership with Burtonwood Investment Partners, Lume comprises 14 architecturally designed two, three and four-bedroom townhomes created for families seeking the space of a freestanding house with the ease of modern, low-maintenance living.

The three-storey residences, designed by award-winning architecture practice <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a>, have been tailored for families and multi-generational living, featuring private internal lifts, flexible lower-level spaces, generous open-plan living and entertaining areas, media rooms, and landscaped outdoor spaces with custom outdoor kitchens.&nbsp;

Inside, engineered oak flooring, bespoke dining joinery with integrated wine fridges and backlit bars, sculptural porcelain bathrooms, Parisi freestanding baths and Astra Walker tapware create interiors that balance functionality with refined finishes.

Each townhome has been designed to combine generous internal spaces with sustainability initiatives such as EV charging infrastructure, while <a href="https://www.apartments.com.au/landscape-architect/arcadia-landscape-architecture">Arcadia</a>'s landscaped communal areas, centred around a restored creek line and native planting, encourage residents to connect with nature and spend more time outdoors.

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Rothelowman's Gary Tsui said the architecture was conceived to respond carefully to its Upper North Shore setting.

"Our vision was to create elegant, uplifting homes that draw on and positively contribute to the local character through meticulously considered design and an interaction with the surroundings."

The communal landscape has been designed as more than an open space between homes. Arcadia's Ben Newell and Kate Phillips said the adjoining reserve provided an opportunity to create a distinctive natural retreat for residents.

"Just as waterways carve their way through Ku-ring-gai's landscape, a raised boardwalk weaves through the reserve, connecting the homes to this tranquil oasis."

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Located just 300 metres from <a href="https://www.apartments.com.au/developments/gordon-nsw-2072">Gordon</a> Village and Gordon railway station, Lume offers convenient access to Sydney's CBD while placing residents close to some of the North Shore's leading schools, including Ravenswood, Pymble Ladies' College and Knox Grammar. Lane Cove National Park, Gordon Golf Club and a range of cafés and restaurants further reinforce the family-focused lifestyle on offer, with the BMW iX3 50 complementing everything from local trips around Gordon to weekend drives and city commutes.

Construction is underway with completion expected in mid-2027.

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Joel Robinson

Boutique Gordon townhomes now come with a BMW iX3 50

Two apartments have sold for more than $10 million at EADE Byron Bay, setting some of the highest apartment prices ever achieved in the coastal town and underlining the growing appetite for luxury beachfront apartments in Australia's most popular coastal locations.

The $210 million project by Vitale Property Group has now secured more than $70 million in sales, led by residences that changed hands for $12.75 million and $11.75 million.

The record-breaking transactions reinforce the shift occurring in Byron Bay's premium property market, where affluent downsizers and lifestyle buyers are increasingly opting for high-end apartments over large beachfront homes.

<a href="https://www.apartments.com.au/new-apartments/eade-byron-bay-29-shirley-street-byron-bay-nsw-2481">EADE Byron Bay</a> occupies a rare 6,000 sqm absolute beachfront site on the corner of Shirley and Milton Streets overlooking Main Beach and The Wreck surf break, just 350 metres from Byron Bay's town centre.

The 25-residence development is the first beachfront apartment project approved in Byron Bay in more than a decade and is currently under construction, with completion expected in May 2027.

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The project has attracted a mix of local Byron Shire residents downsizing from larger homes, alongside interstate buyers from Sydney, Melbourne and Brisbane seeking a permanent coastal lifestyle without compromising on space.

Designed by <a href="https://www.apartments.com.au/architects/hayball">Hayball</a> and with interiors by <a href="https://www.apartments.com.au/interior-designers/alexander-co">Alexander &amp; Co</a>, EADE comprises&nbsp;10 garden apartments ranging from 284 sqm to 622 sqm, nine with private pools, five full-floor apartments and 10 rooftop residences with private plunge pools, expansive outdoor entertaining areas and uninterrupted ocean views.

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<a href="https://www.apartments.com.au/developers/vitale-property-group">Vitale Property Group</a> Managing Partner Chris Vitale said the project's combination of scale, location and limited future supply was driving buyer demand.

"There isn't another beachfront holding in Byron Bay of this size and position that could be developed again," Vitale said.

"Buyers are responding to the scarcity and the irreplaceability of a site of this calibre and to floorplans they can't find elsewhere in the market.

"We are seeing buyers place significant value on quality, space, design, resort-style amenities and the rarity of the location. The sales achieved to date demonstrate that discerning purchasers recognise the long-term significance of what is being created at EADE Byron Bay.

"Many are coming from larger homes in the Byron region, or from Sydney, Melbourne and Brisbane, and are after the space, security and convenience, without the upkeep of a house."

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The Byron Bay project follows Vitale Property Group's delivery of the Mondrian Hotel and Private Residences at Burleigh Heads, with EADE continuing the developer's focus on luxury coastal developments.

Residents will have access to a resort-style swimming pool, gymnasium, sauna, cold plunge pool, concierge services and dedicated workspaces, while the project is targeting an 8-Star Green Star rating.

EADE Byron Bay is being exclusively marketed by Projx Australia in conjunction with WHITEFOX Projects.

WHITEFOX National Projects Director Phillip Rand said demand had been driven predominantly by owner-occupiers.

"We are seeing buyers at EADE place significant value on quality, space, design, resort-style amenities and the rarity of this location," Rand says.

"The sales achieved to date demonstrate that purchasers at this level recognise the long-term significance of what is being created at EADE Byron Bay."

Residences at EADE Byron Bay are currently priced between $4.75 million and $15.95 million.

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Vitale breaks Byron Bay records with EADE sales flurry 

When buying an apartment, most people compare the big-ticket items first. Floorplans. Kitchens. Balcony size. Natural light. The view.

But there's one everyday consideration that often doesn't come up until after moving in: how parcels are delivered.

As online shopping has become part of everyday life, parcel deliveries have shifted from an occasional event to a regular occurrence. Australians spent a record $82.6 billion shopping online in 2025, with almost one in every four retail dollars now spent digitally.

For apartment residents, that can present a challenge.

If nobody is home to accept a delivery, parcels may be redirected to a nearby Post Office, left in a building lobby or common area, or require building management to step in. In higher-density buildings, where dozens or even hundreds of residents may receive deliveries each day, parcel management has become an increasingly important part of everyday living.

That can create a range of frustrations. A missed delivery often means making time to collect a parcel elsewhere, while packages left unattended in foyers or mail areas can create clutter and increase the risk of theft. What seems like a minor inconvenience can quickly become a recurring issue for residents who shop online regularly.

It's one of those details that rarely features in a display suite but can have a noticeable impact once residents move in.

As a result, buyers are beginning to look beyond traditional apartment features and consider how a building supports day-to-day convenience, including whether there are secure options for receiving deliveries.

Australia Post's Parcel Lockers provide one solution.

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Rather than having a parcel delivered directly to an apartment, eligible deliveries can be sent to a nominated Parcel Locker. Once the parcel arrives, residents receive a notification through the AusPost app or SMS and can collect it using a QR code or one-time PIN at a time that suits them.

The Parcel Locker network now includes more than 1,500 locations nationwide, with installations at Post Offices, shopping centres, transport hubs and an increasing number of residential developments. By providing a secure collection point, Parcel Lockers help reduce missed deliveries and avoid parcels being left unattended in common areas.

For developers, parcel infrastructure is becoming another way to improve the resident experience. Rather than relying on concierge staff or leaving parcels in communal spaces, secure collection points help streamline deliveries while preserving the presentation and functionality of shared areas.

For buyers, it's a reminder that the best apartment features aren't always the most obvious.

A generous floorplan or quality finishes might help narrow the shortlist, but the conveniences that simplify everyday life, whether that's EV charging, secure bike storage or reliable parcel delivery, often become the features residents appreciate most once they're living there.

The apartment feature many buyers don't think about, until their first missed delivery

<a href="https://www.apartments.com.au/developers/hg-developments">HG Developments</a> is doubling down on Maud Street in Newstead, filing plans for a new apartment tower just a few doors down from its under-construction Aire Newstead development.

Recently submitted to Brisbane City Council, the proposal is for an 18-storey building designed by bureau^proberts, which has drawn heavily on Brisbane's subtropical design principles while referencing the suburb's industrial heritage.

A total of 64 apartments are planned for the amalgamated 1,518 sqm site at <a href="https://www.apartments.com.au/new-apartments/17-21-maud-street-newstead-qld-4006">17–21 Maud Street</a>, a short walk from the Brisbane River and Newstead Riverwalk.

<img alt="First look: HG Developments plans 18-storey subtropical apartment tower for Newstead" data-entity-type="file" data-entity-uuid="a400c7fd-bd15-48f8-a63b-10ede92efe00" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Maud%20st%20bldg.png?VersionId=.0vPmjpbC7CNP7kqGWa6L7rGIwsNExaw" />

"The building is defined by a series of vaulted motifs that reinterpret the arches, colonnades and layered facades evident throughout Newstead's historic built fabric," the Urban Design Report states.

"Combined with recessed glazing and generous balconies, these elements create a layered building envelope that provides shade, weather protection and opportunities for natural ventilation whilst establishing a distinctive architectural identity."

The proposal comprises 64 two, three and four-bedroom apartments across 18 residential levels, positioning it alongside a growing number of taller residential projects transforming Newstead's northern precinct. The tower incorporates extensive subtropical landscaping, with cascading planter boxes, deep planting at street level and a landscaped rooftop recreation area.

<img alt="First look: HG Developments plans 18-storey subtropical apartment tower for Newstead" data-entity-type="file" data-entity-uuid="1d8140f4-8b98-45cd-b1b8-1efe8c8e266b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Maud%20st%20podium.png?VersionId=VAZtbCoD44YCJ57N99fQCAKeSJx7ldZs" />

Bureau Proberts has prioritised passive environmental design throughout the project, with generous balconies, recessed glazing and operable façades helping reduce solar heat gain while maximising natural ventilation. River views become available from the upper levels, while the building has been orientated to capture prevailing breezes from both the Brisbane River and the west.

The architects say landscape is intended to be integral to the building rather than an applied element.

"Vertical greenery, cascading planter boxes and elevated gardens are woven throughout the architecture, softening the built form and strengthening the connection between residents and the subtropical environment."

"Through the integration of landscape, high-quality materials and passive design principles, the development delivers a refined residential address that celebrates Newstead's heritage character while contributing positively to Brisbane's evolving subtropical identity."

Newstead has remained one of Brisbane's most active apartment markets in recent years, with a number of developers continuing to back the inner-city suburb.

HG Developments is currently delivering the 40-apartment Aire Newstead at 25 Maud Street. Fortis recently launched the 65-apartment <a href="https://www.apartments.com.au/new-apartments/crest-walker-newstead-12-kyabra-street-newstead-qld-4006">Crest &amp; Walker</a> on Kyabra Street, while builder-developer BPG and Don O'Rorke's Consolidated Properties are both expected to launch their respective Newstead projects before the end of the year.

HG Developments doubles down in Newstead with second Maud Street apartment development

Walk past a new apartment development promoting its sustainability credentials and it's easy to picture rooftop gardens, mature trees, landscaped courtyards and residents surrounded by nature.

But in many cases, that's not actually what those sustainability ratings guarantee.

Australia's leading environmental rating tools have played a significant role in improving the energy efficiency and environmental performance of buildings. Yet despite their focus on reducing emissions, many don't require developers to include trees, biodiversity or meaningful green space.

In other words, a building can achieve one of the country's highest sustainability ratings while containing little more than concrete, glass and hard landscaping.

That disconnect has led to the emergence of a new movement across Australia's property industry: nature-based cities.

The concept goes beyond designing buildings that consume less energy. Instead, it encourages developers to treat nature as essential infrastructure, integrating biodiversity, tree canopy, living landscapes and green spaces into projects from the earliest stages of planning.

Research has consistently linked access to nature with better physical and mental health, cooler neighbourhoods, improved biodiversity, stronger climate resilience and more connected communities. As Australia's cities continue to become denser, advocates say those outcomes should be considered just as important as energy efficiency.

Nature Based Cities (NBC) was established in 2022 to help accelerate that shift.

Founded by Hamton Executive Chairman Paul Hameister OAM, the not-for-profit was created after research highlighted a significant gap in Australia's sustainability framework. While existing environmental rating tools rewarded energy performance and emissions reductions, they placed little emphasis on the inclusion of living landscapes.

"We've always wanted to do more, and we know other developers who want to do more, but the ESD rating tools just aren't there," Hameister says.

"In Australia, you can have a five-green-star rated building that's concrete and glass with not a blade of grass.

"The focus is on reducing emissions, which is laudable, but there hasn't been enough attention paid to protecting and re-establishing nature. We need both for the health of the environment and for communities."

Since its launch, NBC has developed independent design guidelines and accreditation frameworks that encourage developers to prioritise ecology, biodiversity, tree canopy, walkability and living landscapes alongside traditional sustainability measures. The organisation first focused on medium and high-density residential developments before recently expanding into precinct-scale communities and masterplanned neighbourhoods.

Jan Talacko, founder of sustainability consultancy Ark Resources and a member of the Nature Based Cities Advisory Council, says the initiative addresses an area that has largely been overlooked by the property industry.

"Throughout my 25 years of working collaboratively with all stakeholders in the property sector, I've always favoured a pragmatic approach to sustainable design which encourages initiatives that not only meet environmental expectations but also improve amenity," Talacko says.

"Whilst we are making steady progress in relation to energy and carbon emissions from buildings, there has been much less emphasis on encouraging biodiversity and tackling the urban heat island effect.

"The Nature Based Cities initiative responds to a gap in the suite of tools currently used by the property development sector, which don't provide sufficient incentive, or recognition, for the integration of landscaping and greenery."

For apartment buyers, the shift is also changing the questions worth asking.

Rather than assuming a sustainable building will naturally include abundant green space, buyers are increasingly being encouraged to look beyond environmental ratings and ask what nature is actually being delivered. How much tree canopy will the development create? Has biodiversity been considered? Are landscaped spaces designed for people as well as appearance?

As Australia's cities continue to grow upwards and outwards, the next generation of sustainability may not simply be measured by lower emissions, but by how successfully developments bring nature back into everyday urban life.

Mark Wist

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