Michael Pascoe had an excellent article on the weekend:
Lang Walker knows a bit about property development and investment – he’s been doing it for the better part of 40 years and became a billionaire twice over in the process…If one thing has distinguished Walker, it’s been his ability to sell out at the right time, or close to it, and come back to the party later. He’s been as much a trader as an investor.
While the Walker empire is always open to deal, he has two major sell-downs on his corporate CV: In 1999 he sold his stake in the then-listed Walker Corporation to Australand – the dot-com bomb hitting the next year didn’t damage him; and in 2006 he flogged a $1.25 billion portfolio to Mirvac – and his business kept growing through the GFC.
And now he’s attempting his biggest sale ever – about $2.5 billion for Melbourne’s Collins Square properties. There might be a lesson here somewhere.
I once asked Walker how he knew it was time to bail out ahead of the GFC. He said it was because the money being paid for property simply didn’t make sense, he couldn’t see how it could be developed and rented at a profit. He mentioned a particular competitor in the industrial space who seemed to be sending “kids with clipboards” to auctions paying more for land than the land could return. It wasn’t hard to decide to sell down.
Walker now looks like taking advantage of mainly foreign buyers – from Canadian pension funds to Chinese billionaires – chasing prime CBD property in their global search for yield. And while they’re searching and buying, they’re pushing down the yields they seek.
And the charts:
They do not look very good, do they? As the great Australian reckoning moves forward I expect office and retail to supper. Industrial might do better, at least on dollar exposure.
The only question I have is why Mr Pascoe is concurrently telling folks to buy banks.
