July 22 2010
Property investment expert says 'boring can be good'
leading property expert says that investors hurt by the drop in value of
property trusts like Stockland, Mirvac and ING during the recent global
financial crisis could have avoided the damage if they had stuck to
basic proven investment principles.
Professor David Parker, the Professor of Property at UniSA’s School of Commerce, will discuss what went wrong when Australian Real Estate Investment Trusts (AREITs) dropped up to 90 per cent in value during the global financial crisis and what the outlook is for the sector at a free public seminar this coming Thursday (July 29th).
Prof Parker says that many investors made the mistake of investing in the unknown in the hope of quick gains before the crash.
“Investing in AREITs with large overseas property portfolios, high debt and lots of tricky derivatives was quite different to investing in the AREITs of the past with their Australian office buildings and shopping centres, low debt levels and little, if any, use of derivatives,” he says.
“Many investors and financial planners made the mistake of thinking the new AREITs were the same as the traditional trusts of years gone by.
“There are certain basic principles that investors should follow when considering what their property trust portfolio should look like. ‘Boring’ investments – those that people are familiar with, where they recognise the buildings and where they trust the management who have a good track record, are often the best option. ”
In his lecture, Prof Parker will explain how the market ended up in such a dire position and how so many big name stocks with historically stellar performances had their prices decimated as investors fled the sector.
“As the market rose, there was much discussion in the press and on TV of a new paradigm and that things were different now. Traditional theories from valuation, finance and management were put to one side as they were claimed to no longer explain the market boom,” he says.
“But, when the boom bust, all of a sudden the various theories worked again. In reality, the theories had worked all along - it was the practice that had come unstuck.”
Prof Parker says that despite the crash, recent growth suggests that AREITs remain an attractive investment option with the potential for continued growth into the future.
“If managed correctly, AREITs can be a source of strong income returns and steadily growing capital returns for investors,” he says.
"The trick is to choose which AREITs to invest in and correctly applying knowledge from valuation, finance and management theories can make this a whole lot easier."
Prof Parker will deliver the address as part of UniSA’s Knowledge Works series, a series of free public lectures that aim to provide the community with access to academic expertise and research.
He is the inaugural Professor of Property at UniSA, leading the established property program. He is also an Acting Commissioner of the New South Wales Land and Environment Court with research interests including REITs, valuation theory and the interaction between property valuation standards and accounting standards. His next book, REITs: People and Process, will be published later this year.
Investing in Australian Real Estate Investment Trusts: Theory and Practice
Professor David Parker
Thursday 29 July, 5.45pm for pre-lecture drinks, 6.00pm lecture start, 7.00pm drinks and networking
Bradley Forum, Level 5, Hawke Building, North Terrace, UniSA City West campus
Register at www.unisa.edu.au/knowledgeworks
- Kelly Stone office (08) 8302 0963 mobile 0417 861 832 email firstname.lastname@example.org