property trusts close to end of a/v writedowns, page-3

The following is an extract from the article you posted TP...

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THE worst is not over yet -- that, at least, is the belief of analysts, with some saying asset value writedowns for listed real estate trusts are likely to be even larger than they were for the December 2008 half-year results.

Goldman Sachs JBWere head of property research Simon Wheatley said he believed the asset writedowns would be larger than at December.

"Last time there was a 48 basis point capitalisation rate softening and $11 billion of asset value written off," he said. "I think there will be more than that."

Asset values were likely to continue to fall in the 2010 year.

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I wouldnt put much stock into what this particular analyst at GSJBW has to say. A week before Centro's billions in debt matured in December, GSJBW released a research report on CNP/CER slapping it with a sell recommendation on the basis that it was highly unlikely that an agreement would be reached with its financiers. I lost all respect for that organisation after reading that research report and the infamous article in the lead up to the maturity date titled "Bale out of Centro".

Following are some extracts from their research report on CNP/CER back on 8 Dec 2008:

• We believe that market conditions have deteriorated markedly in recent
months with asset value declines becoming more apparent and showing
increasing downside risk, and with the credit market issues continuing to
be heavily impacted. We believe that the opportunity for CER or CNP to
trade out of their difficulties has become ever more difficult and is now
highly unlikely. This leaves a break-up as the only likely viable outcome
and our bearish view on real estate asset values does not bode well. We
believe that remaining investors should liquidate their limited remaining
holdings rather than risk a protracted wind-up.



We are moving our recommendation for CER (and CNP) to SELL from Hold. We have
significant concern about the upcoming refinancing which is due mid December and needs to
be rolled once again. It is our view that the likelihood of a further extension is increasingly
low.
Our reasoning is that CER has been in this financing bind for some 12 months now and,
despite securing several short term financing roll-overs, it has been unable to secure any
meaningful asset sales which were needed to address the debt positions. We believe the
pricing of assets has deteriorated markedly over the past few months and that Centro has
missed its opportunity of earlier in the year to offload assets. Consequently we believe that
its debt to assets ratio has weakened markedly in recent times and it is increasingly difficult
for the company to justify to its lenders that it can formulate an executable plan to extricate
itself from its current position in the forseeable future.

The options for Centro, if it cannot extend its credit lines further, are extremely limited. Even
if it were to survive, we believe it has no real viable alternative now than to liquidate the
portfolio over time and seek to return any excess capital to investors. We are recommending
to investors that they sell their holdings in advance of the December 15 refinance date to
take out what little equity remains in the stock price.


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LOL to the above........

Anyway IMO fundamentals in the Australian retail sector continue to be favourable:

- Occupancy rates still near 100%
- Rental increases on new/renewal leases
- Retail sales strong even in discretionary sectors (Refer to DJs article I posted yesterday on HC)
- Stimulus packages having the desired effect

For CER they are more increasingly favourable:

- Non discretionary anchors at all Aust centres
- CNP/CER started writing down its assets 6-12 months before other REITs. Its non discretionary focus should insulate it from further writedowns.


CER's Aust portfolio decreased by 10% for the HY ending 31 Dec 08. If we see a decline of half that amount for the 30 June 09 HY I will be extremely surprised

Please DYOR

CHeers