Having finalized the takeover of the small listed MacarthurCook Industrial Trust last month, the US-based CommonWealth REIT has an ambitious plan to grow a portfolio of up to $1 billion in the next 12 months.
To achieve the task, it has relocated chief investment officer John Mannix to Australia.
Adam Portnoy, president and chief executive of the Boston-based RMR, manager of CommonWealth REIT, is in Australia to evaluate potential acquisitions.
Mr. Portnoy, who spent a semester at the University of NSW and played Aussie rules football, is going through a long list of properties valued in the “hundreds of millions of dollars.”
Through his joint venture partner AIMS Financial Services, controlled by George Wang, Mr. Portnoy has been briefed on portfolios belonging to Centro, Orchard, Becton and Woolworths.
He looked over some of Centro’s shopping centers in the US, but decided not to pursue them. “Our trusts have an average leverage of 30 to 50 per cent, so we are not heavily geared,” he said.
“We are only interested in assets which do not have a lot of debt. When we bought the MacarthurCook Industrial Trust, we paid back $65 million in debt.”
It paid 66c per unit to take over the now delisted industrial trust with assets valued at $120m.
“It may suit us to be buying individual assets to slowly build up a portfolio,” Mr. Portnoy said. “We’re patient investors. We made 25 individual purchases to build up our first billion-dollar portfolio.”
CommonWealth REIT is doing a due diligence for an office building valued at $40m to $50m.
He said the group’s Australian investment was held in the CommonWealth REIT and when it got to the right critical mass, the Australian portfolio could then be spun off and listed in New York. “We aim to grow our portfolio in Australia to at least $US 500m ($512.3m) and $1bn in the next 12 months.” He said.
And despite the depreciating US dollar, the plan is to borrow cheap money in US to invest in Australia.
“We believe the Australian dollar will continue to appreciate in the next two to three years, but we are not short-term investors.
“The next generation of growth is in Asia. We looked at China, but decided against investing there and instead to focus on Australia, which is tied to the Asian economy.”
He said the Australian market appeared to be “unfreezing” and more assets would come on the market in coming months.
CommonWealth REIT is one of four listed trusts managed by RMR and listed on the New York Stock Exchange. The other three trusts are Hospitality Properties Trust, Senior Housing Properties and Government Properties Income Trust.
It is also manages two listed property companies—Five Star Quality Care (aged care) and TravelCenters of America, which operates the second-largest network of truck stops on US highways.
The group, which generates about $US9bn in revenue a year, has $US18bn of assets under management.
“We were one of the largest buyers of properties in the US in the past year. We still have undrawn credit facility of $US2.5bn,” Mr. Portnoy said.
So far this year, the US REIT sector has risen by 40 per cent, while the share price of CommonWealth REIT has risen by “100 per cent”, he said.
The group was founded in 1986 by Barry Portnoy, a bankruptcy attorney, who remains executive chairman.