Turi Condon | April 03, 2008
UP to a third of Australia's listed property trusts are likely to disappear as the $90 billion sector heads towards another wave of mergers and acquisitions, according to Mirvac Group managing director Greg Paramor.
"Will our sector survive untarnished? No, it won't. We've already seen that with the Centro and Allco trusts," he said.
Asked whether Mirvac would set up a vulture fund to take advantage of the forced sales, Mr Paramor said: "An opportunistic fund is probably a nicer word." He indicated that Mirvac and other property groups were likely to launch such funds over the next year.
In a wide ranging interview with The Australian, Mr Paramor slammed regulators and called on the ASX and corporate watchdogs to stamp out the current wave of market manipulation.
Regulators, particularly in the US, had been found wanting, he said. He also criticised the ASX, saying there was a conflict between its role as a regulator and the income it received as activity on its exchange increased.
"This whole notion of market manipulation, people betting on bad news and putting bad news in the market -- those practices have to outlawed," he said.
"We're relying on the ASX for superannuation savings, relying on them to be a proper, prudent clearing house for securities, and if they have practices that exacerbate market volatility, then they have to stop them."
In listed property, Mr Paramor expects between a quarter and a third of the current 37 trusts and property companies to disappear.
"The sector does expand and skrink," he said.
"Fifteen years ago there were 60-something trusts and that halved to 30-something and then expanded again."
Access to capital would be king over the upcoming period, Mr Paramor said.
He said Australia's listed property sector might return to "plain vanilla" trusts where the income was derived from leased real estate rather that mixing riskier businesses into the one vehicle.
"Investors may say, 'this is my superannuation money, I would like to see my risks separated'," Mr Paramor said.
Mirvac has been flagged as a bidder for Centro, but Mr Paramor said Mirvac "was not there any more". While market commentators had suggested that this property market downturn was different from past cycles, Mr Paramor said the underlying problem was the same.
"Its absolutely extraordinary: every time the property market heads into a slump, it's caused by credit. Think back to 1990: the last big crunch was overzealous bankers lending lots of money on deals that weren't bankable," he said.
The outcome for the property market would be a period of stalemate, where a lot of property would not sell in the short term.
Mr Paramor said that if Mirvac had been faced with a significant discount on its half-share in 101 Miller Street, North Sydney, it would have held the property.
The sale of 101 Miller to fund manager Eureka became unconditional this week at a revised price of $230.1 million, a 2.7 per cent discount on the price struck in December.
On other Mirvac issues, Mr Paramor said the group was holding $1 billion worth of presale contracts on its residential developments; had not had any talks with City Pacific about taking over the $1 billion staged Gold Coast master-planned community Gainsborough Greens; and had a watching brief on the Lane Cove tunnel (the group has $57.5 million stake in tunnel owner Connector Motorways).
He said there was no plan for a write-down. Both Leighton and Hong Kong billionaire Li Ka-shing's Cheung Kong Infrastructure's have slashed the value of their interests.