Property
Issue No. 46 - April/May 2009
Why locals are buying
Another phenomenon of the times is a reversing trend in commercial property, where SA investors and consortia are taking up major local properties as institutional owners put them on the market.
John McBeath, State Manager for Jones Lang LaSalle, explains how dramatically different capital availability has turned the tide.
“Local buyers have been kept out of the commercial and industrial investment markets for some time as institutions (including Listed Property Trusts or Australian Real Estate Investment Trusts) have soaked up just about every asset that became available,” John says.
“Now that the LPTs have been forced to restrain themselves due to lack of debt funding, the local investors have been able to compete and pick up assets
that would otherwise have gone to the institutions.
“The identity of the local investors is kept quiet,
however in Adelaide there is a mix of locally managed
syndicates and local individuals as well as some interest from interstate and overseas private investors.
“This is very good for the SA economy because unlike many of the institutions, these privates typically manage through local agents and use local service providers, therefore bringing jobs to SA and keeping the money flowing locally.”
A critical consideration has been how valuations are taken into the owner’s accounts due to accounting standard changes such as US Government Sarbanes Oxley Act requirements and and IFRS.
“In particular, the requirement to report changes in asset value as profit or loss has been huge,” John says.
“Obviously when asset values are increasing, this increases profit, but when asset values are dropping, profits are reduced.
“Debate continues as to whether it is appropriate to take up ‘paper’ profits or losses when the underlying asset is liquid - like a share or bond - and whether sometimes this is not logical when the asset is much less liquid - like ...
