Australians are on the prowl for American retail bargains.

Multifamily, office and retail REIT, Colonial Properties Trust, sold a portfolio of six regional malls for $362 million to a partnership between Australian real estate firm, The GPT Group, and investment and advisory company, Babcock & Brown, last week.

Both firms are listed on the Australian Stock Exchange and their acquisition highlights a busy year of direct investment by Australian firms in United States' retail assets.

"One of the largest foreign buyers of retail assets have been the Australians," said John Moss, senior vice president of retail operations at Colonial Properties. "They've invested in mainly open air malls however, and with this transaction now they're getting into enclosed malls as well."

Australian real estate investors have left their home country in search of better yields, says Gerard V. Mason, executive managing director at Granite Partners, the firm that brokered the sales transaction.

While the US's comparatively strong real estate fundamentals have been a big lure, Australians have been hindered in men" ability to invest by a currency exchange rate that has not been as kind as it has been for the Euro or Yen. Australian investors have consequently been especially sensitive to the trend of increasingly aggressive cap rates for first class retail strip centers and malls.

"It's tough to acquire anything at a reasonable price these days," Mason said. "They can't buy into 5 or 6 caps."

The Australian joint venture was able to buy into the deal because the properties, located in North Carolina, Alabama, and Georgia, didn't grab the kind of attention that commensurate assets in major markets would. But Mason said that the portfolio earns unusually successful returns because three of its malls are in towns with large colleges that fuel business.

"They're the only malls in their region," Mason said. "For first class malls in major markets you typically would have competition, but here you have some strong markets that are under the radar a little bit and there's nothing to compete. This was a very savvy investment."

The deal comes just a few months after Galileo America's $968 million acquisition of 69 shopping centers throughout the US from shopping center REIT New Plan in July. Galileo entered the US market in November 2003 by acquiring 51 shopping centers from CBL & Associates Properties.

At least one office REIT has taken steps to tap the seemingly increasing Australian appetite for US property as an added source of investment. Reckson Associates launched a spin-off property trust in August--to whom it sold a 3.4 million s/f group of 25 office properties for approximately $563 million--that will trade on the Australian Stock Exchange.

"[The new trust] will enable us ... to enhance our competitive advantage, while sourcing capital globally," said Scott Rechler, the firm's president, in a statement released by Reckson. "Our successful launching of Reckson NYPT is a significant achievement because it is the first Australian listed property trust to focus on US suburban office properties."

Colonial Properties, meanwhile, plans to have further dealings with the two Australian firms. It will continue to provide management and leasing services for the mall portfolio and said it will consequently retain a 10% minority interest, an equity stake that Moss called a "normal arrangement" for an entity looking to divest itself of ownership but still garner a fee stream from running the properties. Moss hinted that Colonial Properties may utilize GPT's expertise in the hospitality sector to eventually develop hotels in the US.

"They are a diversified REIT, like us, and have some areas of expertise that we don't have that we could benefit from in a partnership," Moss said. Moss said that Colonial Properties has focused

on developing properties rather than investing in existing assets due to peak real estate pricing.