I have completed a detailed debt schedule showing just how much interest CER is paying per debt facility.
You will see that interest expense only makes up 42% of total rental income. In other words, rental income would need to decrease by another 58% in order for interest expenses to be greater than income. The estimated rental income takes into account the bankruptcy of Circuit City, Linen N Things etc as worked out on my original spreadsheet.
The actual cost of debt vs the return on asset is significantly more favourable than what the gearing ratio shows.
This is a much more useful indicator than just looking at the total debt vs the valuation of assets, which doesnt really tell us what our cost of debt is vs our return on assets.
I also sent the below email to Investor Services. I didnt know whether some debt is CSF related to US REIT related. It doesnt change the total interest payable I calculated however.
Also US net income is in US dollars and needs to be converted to AUD when working out the distributable income.
The fact that some hedging agreements have been terminated will favourably impact the AUD value of this income.
Also all of the Aust interest is variable and interest rates have decreased by 4% since 30 June.
The amount CER will be paying back to the banks will be significantly less. Cost of debt has decreased signifcantly and return of assets is increasing due to high sales turnover at Australian stores translating to higher rental income.
Most of the Aust interest is hedged with CNP through interest rate swaps. Alot of these agreements have been terminated as per 15 Jan announcement so CER should be able to take advantage of these interest rate cuts.
If you would like this spreadsheet, please let me know and I'll email it through.
Cheers
Hi Alicia,
Further to my email last week about Centro Karingal, I would also like to know if the debt below is related to the CSF portfolio or other US REITs.
The below was taken from the supplemental report dated 29 August 2008.
I believe some of the debt applies to CSF and some of it applies other US REITs.
If you could please provide a response in relation to the Karingal query shortly, that would be greatly appreciated.
