The domestic listed REIT space hots up 

Market commentators believe that the recent A$33bn scrip-and-cash takeover of Westfield Corp (ASX:WFD) -the largest takeover in Australia’s corporate history - is likely to impact other stocks listed in the domestic REIT sector. The question is how much ofthe A$7bn cash component of the consideration - paid to WFD investors on 7 June– will find its way back into the market? Factoring in the proportion of global investors on the Westfield register who will simply repatriate their cash component and investors who take some profits off the table, analysts estimate that between A$1.5bn-A$2bn could be left to reinvest. Predicated on investors maintaining asset allocation, the bulk of this could flow into the domestic listed REIT space. While REIT plays with offshore retail exposure (mirroringWFD) such as Goodman Group (ASX:GMG) and Lendlease Group (ASX:LLC) are likelyto be the main beneficiaries, we suggest that non-retail REIT plays – like Rural Funds Group – could also benefit from the overall investment reallocation process.

On 29 May, US fund manager Blackstone announced a $3.1bn bid tobuy out commercial property investor Invest Office Fund (ASX:IOF). Although,one tenth the size of the Westfield deal, the delisting of Invest will resultin additional cash looking for a new home in the domestic REIT space.

RFF’sA$15.7m acquisition in May 2018 of a 7,600ha cattle property in centralQueensland falls into the group’s strategy of identifying investmentopportunities in Australia’s fragmented and capital constrained agriculturalsector. With some A$60m remaining in available debt facilities (following therecent debt-funded acquisition), RFF is well positioned, we believe, to takeadvantage of additional acquisition and development opportunities over themedium-to-long term.