Another day, another week, another couple of billion sucked out of the market to replenish the shattered balance sheets of another property group or two.
The battered Goodman group was reportedly holding its hand out for another swag of money, said by media reports to be $1.7 billion, and the ALE Property trust, which controls the freeholds of many of the better hotels in the Woolworths’ hotel division, was asking for more than $100 million.
And we had another set of write-downs from a listed trust.
Analysts keep on talking about the listed property sector hitting a trough and looking better, but the begging bowls and red ink continue unabated.
Macquarie CountryWide Trust has cut the value of its property portfolio by nearly 9%, following revaluations of the assets.
The news comes two weeks after it revealed it was cutting its American exposure by 75% and selling assets at a 24% discount to the 2005 purchase price.
Now the trust said yesterday the revaluations, based on a review of 70% of its portfolio, had resulted in a decrease of 8.9%, or $401 million, from the book value.
"In addition, the portfolio sales in the US, to Inland in April 2009, and the recently announced sale of a US joint venture interest to GRI, have reduced the carrying value of the Trust’s interests in its US joint venture entities by $485.2 million," the company said in the update.
Chief executive Steven Sewell said during the past 18 months $2.33 billion in assets had been sold or were contracted to be sold.
"On completion of these sales the Trust will repay or eliminate $1.8 billion of property-level debt," Mr Sewell said in the update yesterday.
Macquarie CountryWide said the US sale had been completed. The securities rose half a cent to 50 cents.
Goodman Group requested a trading halt before revealing details of its planed $1.7 billion capital raising.
Market report said the will comprise a $1.2 billion equity raising through Macquarie Capital, and a $500 million preference share issue to the Chinese Investment Corporation through Morgan Stanley.
The funding follows a deal announced in June by Goodman where the China Investment Corp (The Chinese Government’s main sovereign wealth fund) will emerge with 8% to 10% of Goodman, and eventually up to 19.9%. Macquarie will hold about 11% via an earlier recap move by Goodman.
Under that initial deal with CIC, it will commit to $200 million in cash as well as share in an issue of 255.3 million options with Macquarie at 40c per option.
As part of the June deal, Macquarie also sold down $15 million to CIC out of its original $300 million commitment announced on May 19.
Goodman has already used the money raised to repay debt, and it has over $1 billion due in the next year.
And, hotel owner ALE Property also is in a trading halt, as it holds its hand out for $105 million and promises to sell $120 million in assets over the coming 12 months.
The trust has already sold a number of hotel freeholds in recent months in Sydney and Melbourne.
The Kirribilli and Pymble hotels were among those sold and it’s obviously looking to raise enough new capital to be able to meet some medium-term debt requirements.
Since last September, more than $15 billion has been raised from investors in the listed property trusts by the likes of Westfield, Mirvac, GPT, Goodman, Valad and smaller players. Mirvac and GPT have made at least two separate raisings, Goodman, at least three.
The money had been used to replenish balance sheets and pay down debt, or finance huge multi billion dollar write-downs.
Meanwhile the Property Council’s latest Office Market Report has no joy for the major CBD property trusts, such as those at Colonial and Macquarie.
In the six months to July 2009, Sydney’s vacancy rate jumped to 7.7%, from 6.5% six months ago, while nationally, there was 160,284 square metres of space waiting to be filled.
The Property Council’s Office Market Report shows that a further 550,000 square metres of new stock is due to be added to the Australian market in the current half of the year, with a further 737,450 square metres next year.
In the past six months total vacancy for all of Australia’s office market rose sharply from 5.9% to 8.3%. Total vacancy is now at its highest level in four years.
If interest rates rise in the next year, it will add further pressure to already weak capitalisation rates and could force another increase, on top of an expected fall in rental income in that time.
