Property News Update from The Light of Day |
| received from The Light of Day on 30 April 2010 UNLISTED PROPERTY UPDATE APRIL 2010 CAMPAIGN UPDATE Light of Day recently made a submission to the Senate Inquiry into Bank Lending to Small Business, which is now available on both the Light of Day website and at http://www.aph.gov.au/SENATE/committee/economics_ctte/small_business_10/submissions.htm. We are still working on having the seriousness of the submission understood by the committee. BANK LENDING COMPLAINTS Investors in unlisted property have an important role to play in fighting for fairer bank lending practices in the sector. In the opinion of Light of Day, every investor has certain rights enshrined in law, including the right to be informed of the conditions on which finance is extended to their fund by banks. Investors also have the right to complain directly to the banks involved if they consider these lending conditions to be adversely affecting them. The banks cannot ignore such complaints, as they are obligated by law to follow certain procedures when dealing with them. Investor action has the potential to make a real difference to bank attitudes to gouging interest from unlisted property funds. Light of Day Inc is continually expanding our coverage of unlisted property funds, and formulate complaint letters to the banks as more details of their lending conditions come to light. If you are an investor in any of the funds listed below, we urge you to contact Light of Day for a complaint letter to send to your fund’s bank in order to register your concerns about their lending practices. - Becton Retail Fund - Becton Office Fund - Becton Office Fund 2 - Becton Industrial Fund - MAB International Retail Fund - Colonial Private Investor Fund 1 - Commonwealth Property Hotel Fund Investment Fund Contact Light of Day at membership@lightofday.com.au for copies of complaint letters to the banks providing finance to these funds. BANK RESPONSES The Big Four banks have started to reply to the first of the complaint letters, particularly in regards to the MAB International Retail Fund. The responses received so far could be described as inadequate at best, and demonstrate the disdain with which the banks regard investors in this sector. The bank complaints process is legally regulated, and Light of Day intends to take advantage of this to ensure lenders to unlisted property funds are held accountable to investors. If and when you receive a reply to your complaint letter(s) please forward it to Light of Day and we will provide you with a response. If bank responses are unsatisfactory, we will proceed to take the disputes to the Financial Ombudsman Service, which replaced the Banking Ombudsman as the external dispute resolution service. AUSTRALIAN COMMERCIAL PROPERTY UPDATE The Australian property market has recovered from the financial and economic problems of the past two years much faster than expected and the outlook remains positive. Martin Hession, head of property at Australian Unity Investments says that the recent downturn was different to that of the late 1980s and early 90s when there was an oversupply of property that weighed on the market for years. In contrast, the recent turmoil was caused by disruption in the financial sector. Because banks have not been financing property development for almost two years supply is quickly tightening. Economic recovery and growth in white collar jobs provide the ideal conditions for improvement in the property market. According to Mr Hession opportunities for investors were exceptional because in many cases property values are still at levels set when the market feared that Australia was going into recession. Both Australian listed property trusts and overseas funds have raised billions to strengthen their balance sheets. Combined with the lack of new supply the property market may see a reversal of recent circumstances, with money and funds chasing too few properties. The Australian economy seems to be on track to return to trend levels of growth in late 2010 and 2011 and this is being supported by a positive recovery in consumer and business sentiment. However concerns still remain about the pace of global recovery, particularly relating to economic conditions in the United States, the UK and euro zone economies. Global credit markets, although functioning significantly better than one year ago, still remain restricted and this is continuing to impede the prospects of a definitive recovery in the global; economy in 2010. In Australia, access to finance in the commercial property sector remains difficult and transaction volumes across most market segments remain subdued. Numerous development projects have been abandoned or put on hold over the past year. However, positive data from the first quarter of 2010 indicate that the Australian commercial property sector will stabilise and investor confidence will improve as liquidity returns to finance markets through the course of 2010. Since the beginning of the year investors have dived back in Australia’s commercial property market, outlaying $3.5 billion for office, retail and industrial assets during the March quarter, almost half of last year’s total already. Values have begun to stabilise and the rift between buyers’ and sellers’ expectations narrowed, helping lift the level of transactions. According to Jones Lang LaSalle some $1.9 billion worth of national retail assets were sold in the first quarter of 2010 alone, about 90% of the total sales volume for 2009. The office sector has generated sales of $1.5 billion, a figure fast approaching last year’s halfway mark. Jones Lang La Salle’s head of capital markets, John Talbot, said the “fog of negativity” started to lift in late 2009. “We now have a long list of active buyers across most markets, he said, “ investor types range from domestic institutional core and value add funds, private groups and a significant pool of offshore groups who are attracted to the transparency of the Australian market and the strong underlying performance of our economy.” International investors are leading the charge despite the high Australian dollar, with Asian investors accounting for 60% of last quarter’s sales, up 11% from the previous corresponding period. International investors have increased greatly as a proportion, with domestic investors accounting for only 32% of sales values in the March quarter, down from 87% in the previous corresponding period. Despite the weaker domestic interest, Jones Lang La Salle’s John Talbot expects large A-REITs and wholesale trusts to re-enter the investment market. “While we don’t expect 2010 will reach the record level of office sales of $7.63 billion that we saw in 2007, we do see the strong start to sales volumes this year as a barometer for transaction activity in 2010.” Jones Lang LaSalle now has about $1 billion of office property for sale and about $3 billion of retail property. “With greater depth to the buyer pool, improving confidence in the market and greater clarity around pricing dynamics, the total and average value of transactions are predicted to increase over the next 12 months,” Mr Talbot said. |
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