Australia’s Allco Finance Group has begun a fire sale of European assets. Record Realty, a property trust managed by Allco, has put on the market a €350m German and a $653.3m (€413.4m) US portfolio to create instant liquidity.
Record Realty bought the seven German assets three years ago. They all come with leases until 2019 signed by Deutsche Telekom. Jones Lang LaSalle and DTZ are selling the assets.
Allco said the sales came after “a strategic decision to realise the value of Record Realty for the benefit of investors over a three-year period.” But Allco also needs liquidity quickly. The firm is in talks with its bank to restructure its senior debt. On 2 May, an A$250m (€147.1m) bridge loan, which is part of the senior debt, will expire.
In March, three executive directors stepped down, but said they would continue to advise the company. One of those directors was Gordon Fell, who sold the investment trust he built, Rubicon, to Allco late last year. Rubicon entered the European market in 2005. Its first deal involved a portfolio of three office buildings it bought from Deutsche Bank’s Grundbesitz Invest fund.
Last year a wave of Australian investors bought European platforms to access European property stock. Valad bought Scarborough and Teesland, Stockland Corporation bought Halladale, and The General Property Trust bought Halverton.
The Australians had run out of property at home, because most of it is tied up in trusts. These are popular vehicles for the country’s employees, who are required by law to save for their pensions.
Over the past three years, Australians have invested €7.9bn in European real estate, according to Jones Lang LaSalle. Investment volumes peaked at €5bn in 2006 and slowed last year as the market was gripped by the credit squeeze.
In January, Centro Properties became the first Australian casualty of the credit crunch when it had trouble refinancing its debts. It has been forced to sell assets to raise liquidity. Four months ago, many regarded Centro Properties as an isolated case, but that view has now changed. Valad’s share price has experienced volatility recently because the company is seen as a takeover target. And more Australians are expected to offload stock to pay off their debt.
“We will see more Australians coming to the market,” said Timo Tschammler, managing director of DTZ’s international investment team in London. “Just like the Spanish, they will look at where they can create liquidity.”
