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The Impact of the Global Financial Crisis on A-REITs

Author/s: Graeme Newell, Hsu-Wen Peng

Date Published: 1/01/2009

Published in: Volume 15 - 2009 Issue 4 (pages 453 - 470)

Abstract

A-REITs have previously been highly successful indirect property investment vehicles in Australia. However, the global financial crisis has had a significant impact on the performance of A-REITs in 2007-09. This has seen the factors of international property exposure, high debt levels and stapled securities structures having an impact on A-REIT performance. This paper assesses the changing risk profile and portfolio diversification benefits of A-REITs over 1996-2008, specifically identifying the impact of international property, high gearing and property development activities on the performance and risk profile of A-REITs in the current global credit crisis. The impact of high gearing is seen to be the most critical factor in recent A-REIT under-performance.

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Keywords

A-Reits - Gearing Levels - Global Financial Crisis - International Property - Risk Profile - Stapled Securities

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