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US Assets Expose Aussie Trusts

SYDNEY-Hedging US acquisitions with currency swaps could leave some Australian publics exposed to greater risk, a senior investor warns.

By Anita Howarth | Updated on October 17, 2006

(To read more on the multifamily market and the debt and equity markets, click here.)

SYDNEY-Australian listed property trusts that have floated solely to buy assets in the US market could be at risk from adverse currency movements, a senior investment specialist has warned. In an Australian press briefing, Cohen & Steers chief investment officer Joe Harvey warned that Australian companies that have paid above market value for US property assets could be most vulnerable. He added that LPTs have been paying more than their US counterparts for US property assets because the availability of capital is higher in Australia.

“If you use currency swaps to hedge against currency,” he stated, “it gives you additional income.” But he warned there could be a “day of reckoning” when the income stream that is sold to investors “goes away when currency swaps turn the other way. The companies that have been floating here exclusively to buy US assets are the ones to be most wary of.”

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