Property & Real Estate

The continued consolidation of the major A-REITs and developers operating in the Australian market post GFC has served to increase the competition for premium investment grade assets which meet key investment criteria in scale and quality. The influx of Asian sovereign fund investment and a retreat to the local market by Australian A-REITs who were investing offshore pre GST has also intensified the competition for large scale assets which fit corporate and fund investment strategies.

Traditional debt funding remains difficult. As banks demand borrowers meet extremely high hurdles, such as 100% pre-sales on apartment developments, joint venturers or equity investors from Asia have become the most likely source of funds for private developers.

The market is split between the large players, focused on sourcing or developing assets that fit their investment criteria, and the more traditional developers who have the flexibility to be more opportunistic through privately held entities.

In a bid to ensure more assets are viewed as investment grade by the market, there is a trend by vendors to provide more detailed vendor due diligence information (often including position papers on key risks) in order to unlock value and give bidders the chance to quickly assess assets without having to spend substantial amounts on due diligence in the early stages of an acquisition.

The competition in the market makes it all the more important to have advisors who can act swiftly, coordinating the legal and technical analysis of a potential asset or acquisition and who have the skills and experience to ensure that risk is analysed and mitigated and that the most appropriate and efficient tax, GST, stamp duty and accounting outcomes are achieved.