10/365: Investments
Creative Commons License photo credit: chauromano

Ahh the Age beats us to the story! Australian Real Estate Investment Trusts are down 73% year on year. Michael West covers this in Property Not So Safe After All

One of the “leading lights” of the sector, Goodman Group, handed down a $450 million half-year loss this morning: a shocker. Greg Goodman, while a net buyer of Goodman stock over the past 10 years, disposed of 78 million shares after a margin call last year at far higher prices than the 26.5¢ the shares were recently fetching.

The staggering destruction of wealth — principally brought about by the herd-like decision by managers across the sector to expand aggressively over the past few years by increasing their gearing (a decision that has now brought about “Rudd bank”, so the taxpayers can bail them out) — is sadly ironic in light of the property sector’s appeal to those who wanted to take on less risk.

Mum and Dad investors who have lost 73% of their investment must lie awake at night wondering if the multifarious REIT’s, often run as sub-branches of many property development companies, were used as risk taking vehicles for one branch to sell to the other. Or keeping things at arms length, sold perhaps to their colleague’s company.

Now that prices have peaked and fire-sales abound, would the parent company be buying the asset back for a steal? A more subtle version of insider trading, let’s hope someone puts the magnifying glass onto the issue at large.