The long line of REITs that have launched Australian joint ventures may be about to get longer.

New Plan Excel Realty Trust Inc., a New York-based REIT with $3.8 billion in assets in 35 states, issued a statement in mid-April saying it is “exploring possible opportunities in Australia involving certain of New Plan's community and neighborhood shopping centers.” The company refused to elaborate — a spokesperson declined comment and New Plan executives did not return phone calls — but analysts say they suspect New Plan is looking to follow the lead of other REITs that have delved into the Sydney market over the past several years.

“What we believe this means is that [New Plan] may sell assets into a newly created joint venture with an Australian capital partner, enabling [New Plan] to recycle its capital,” J.P. Morgan analyst Michael W. Mueller wrote in a research statement.

The J.P. Morgan statement noted that some published reports have identified New Plan's potential partner as Multiplex Property Trust and estimated the size of the deal-in-progress at $780 million. Multiplex has refused to confirm those reports. However, it did release a statement to the Australian Stock Exchange saying it has “held discussions with a U.S. REIT regarding a possible transaction involving a portfolio of retail assets within the United States.”

On the Beaten Path

New Plan did not elaborate on the structure of its potential deal. But if it follows recent precedent, it might look like this: New Plan and its Australian partner would create a joint venture, with New Plan contributing a stake in a number of its properties and the Australian trust contributing cash; the joint venture would float shares on the Sydney market; and New Plan would retain some interest in, and the right to collect management fees from, the properties involved.

Such deals have been growing in frequency in recent years, as American REITs seek cash infusions and Australian trusts look for safe places to put their money, says James A. Fetgatter, chief executive of the Washington, D.C.-based Association of Foreign Investors in Real Estate. He says about a half-dozen similar deals, worth over $5 billion, have closed since 2003.

In the early 1990s, Australia passed a law requiring all employers to contribute a percentage of each employee's gross salary (now 9 percent) into a private retirement fund for that employee. The program has created a mountain of cash, and Australian property trusts have invested much of it in real estate, Fetgatter says. “From the Australian investor's viewpoint, they're going to be continually motivated to do these kinds of deals because they have so much capital that's coming out of these private retirement accounts,” says Fetgatter.