Two major property funds allied to the Commonwealth Bank’s Colonial First State group of funds have reported sharp June quarter devaluations in asset values and in unit values to conclude a miserable year.
All up the devaluations in asset values for the year to June 30 for both funds, the CFS Retail Property Trust and Commonwealth Property Office Fund, totalled around $1 billion, with over half that happening in the 4th quarter as property values, especially retail centre values fell sharply.
CFS (which has a stockmarket code of CFX) and CPA (same CPA code) both reported softer capitalisation rates in the final quarter, and sharp falls in net asset backing.
CPA’s net asset backing slipped more than 29% over the year, with much of that in the June quarter. CFX’s unit asset backing fell 13%, thanks to a sharp fall in the 4th quarter.
CPA saw its asset values cut by $560 million over the year to June, CFX by $488 million.
The falls showed how soft the markets for office space became in the last nine months of ;2008-09, while the market for retail shopping centres (which is what CFS invests in) weakened noticeably in the 4th quarter.
CFX said in a statement to the ASX after trading had finished yesterday that 22 of the Trust’s shopping centre assets had been independently revalued in the June quarter, "resulting in a 5.1% or $332.1 million decline" in book value.
That was 66% of the total decline in the fund’s asset values over the year.
CFX Fund Manager, Michael Gorman said in the statement: ‘We have been very active in managing our valuation process with 85% of the portfolio valued in the June quarter which, combined with the revaluation of 4 assets in the March quarter, has resulted in the total portfolio being independently revalued in the past six months.’
"The current round of revaluations has resulted in the portfolio weighted average capitalisation rate softening 32 basis points from 6.13% at 31 March 2009 to 6.45% at 30 June 2009.
"The June quarter revaluations follow the $43.4 million decrease on prior book value recorded in the March 2009 quarter when four of the Trust’s assets were revalued and reported to the market.
"Taking into account the mark to market of derivative financial instruments and the latest round of revaluations, the gross assets of the Trust were approximately $7.3 billion at 30 June 2009. The Trust’s Net Tangible Asset backing (NTA) per unit declined 12 cents from $2.14 at 31 March 2009 to $2.02 at 30 June 2009.
Mr Gorman said: ‘The portfolio’s weighted average cap rate has softened from a low of 5.74% at 31 December 2007 to 6.45% at 30 June 2009.
"The relatively modest decline in value reflects the quality of the portfolio as well as the significant redevelopment work that has been undertaken over the past five years,’’ Mr Gorman claimed.
For Commonwealth Property Office Fund (CPA), 16 of the Fund’s assets were independently revalued in the June quarter, resulting in a sharp 9.5% or $195.6 million fall in book value. That was 35% of the total annual fall in asset values for the fund.
Charles Moore, the Fund Manager of CPA said in the ASX statement: “We have continued to actively manage our valuation process with 63% of the portfolio valued in the June quarter which, combined with the revaluation of 13 assets in the March quarter, has resulted in the total portfolio being revalued in the past six months.”
"The most significant falls in value were recorded at 259 George Street and 225 George Street in Sydney, reflecting a combination of higher investment yields and revision of the market rentals profiles and incentive allowances.
"The current round of revaluations has resulted in the portfolio weighted average capitalisation rate softening from 7.3% at 31 March 2009 to 7.7%2 at 30 June 2009 and the portfolio weighted average discount rate softening from 9.1% at 31 March 2009 to 9.3% at 30 June 2009.
"The June quarter revaluations follow the $168.4 million decline on prior book value recorded in the March 2009 quarter when 13 of the Fund’s assets were revalued and reported to the market.
"Taking into account the mark to market of derivative financial instruments and the latest round of revaluations, the gross assets of the Fund were approximately $3.0 billion at 30 June 2009."
That was down from $3.78 billion at June 30, 2008.
The Fund’s Net Tangible Asset backing per unit fell 9 cents from $1.24 at March 31, 2009 to $1.15 at June 30, 2009.
