Property securitisation – an ill-starred concept of the 1980s – reared its head in the Dublin conference. In weighing up the arguments for valuing shopping centres as property assets or as businesses, RICS president Clive Lewis said they were “perhaps not unlike unlisted securities”.
He added: “The recent success of American shopping malls which have been placed in Real Estate Investment Trusts and floated on Wall Street at yields of 7%-8% – compared with yields achieved in the physical property market of around 10%-11% – highlights the attractions of liquidity when combined with such assets. That experience hints to me that the securitisation issue in this country should be revisited.”
American developer Jeremiah O’Connor, president of the O’Connor Group, said that “the drive to securitisation will gain force”. O’Connor has a strong reputation for innovation in the financial packaging of shopping-centre acquisitions. In the UK, he has most recently been linked with the Gallerias.
Only Dusco UK has so far pursued securitisation, with the Victoria Centre in Nottingham and the Gracechurch Centre in Sutton Coldfield. Both schemes are effectively only partial securitisations involving limited partnerships of institutions.
Chris Taylor, associate director at Prudential Portfolio Managers, commented: “I see no reason why funds should not invest more in such vehicles, particularly smaller funds. Shopping centres must be seen as attractive for securitisation given their excessive lot size.”
Taylor said that the limited partnership route achieves tax transparency, unlike previous securitisation schemes. “The main issue here is one of control,” he added.
“Each partner needs to be satisfied that the scheme is being managed satisfactorily.”
