Oct. 19 (Bloomberg) -- The outlook for Australian listed property trusts is improving as the nation’s currency strengthens and the local economy weathers the global recession, according to AMP Capital Brookfield.

Companies that raised capital through share offerings and sales of overseas assets will start to buy real estate assets from local private sellers, said Kim Redding, chief investment officer of Chicago-based AMP Capital Brookfield, a A$6 billion ($5.5 billion) partnership formed this month between Sydney- based AMP Capital Investors and Brookfield Investment Management in Toronto to invest in global listed property trusts.

“Australia stands out like a beacon because the yields here are much greater than other parts of the world,” Chicago- based Redding said at a media briefing in Sydney today. “If you like the Aussie dollar and you like yield, Australian LPTs would be a pretty good place to be.”

Australia’s listed property companies are vying to return to profitability after the 16 members of the S&P/ASX 200 A-REIT Index reported combined losses of A$19.5 billion and writedowns of A$21.7 billion in the year to June 30, according to data compiled by Bloomberg. The losses stemmed from an overseas buying spree between 2005 and 2007 which backfired when property values tumbled and borrowing costs spiked during the credit crunch, forcing companies to write down and sell offshore assets.

Companies on the S&P/ASX 200 A-REIT Index pay an average dividend yield of 8.1 percent, according to data compiled by Bloomberg, compared with 4.4 percent for the 78-member MSCI World Real Estate Index.

Funding Acquisitions

Goodman Group, Stockland and GPT Group led equity sales this year in a bid to repair balance sheets ravaged by asset writedowns. Investa Property Group, the Australian real estate company owned by Morgan Stanley funds, may consider boosting its balance sheet through a A$750 million public offering, people familiar with the matter said Oct. 13. AXA Real Estate Investment Management may be planning an IPO, the Australian Financial Review reported on Sept. 24.

This activity is likely to continue, as property trusts are spurred by the need to cut debt and buy properties at home, said Tim Shaw, who manages the property portfolio of Pengana Capital’s A$1.1 billion Asian equity fund.

Pengana, which shut down its Australian Property Fund in May, may slowly increase its exposure to the market again, albeit within the Asian fund, Shaw said. “In recent months, we’ve been bigger holders of A-REITs as the debt issues were resolved,” he said.

With Australia’s property market already largely consolidated, REITs are likely to turn to private sellers to replenish their holdings, said Jason Baine, portfolio manager at AMP Capital Brookfield.

“There will be more public companies buying assets from private companies,” said Baine. “Now that listed REITs have restored balance sheets, they could be in a position to selectively buy very good properties at attractive prices.”

To contact the reporter on this story: Nichola Saminather in Sydney on nsaminather1@bloomberg.net

Last Updated: October 19, 2009 02:41 EDT