Should also note that the new cap rate of MDT will be 8.4% according to the ann made today.
CER's cap rate was 7.55% as at 31 Dec 08. Centro began writing down its properties 6-12 months prior to most other REITs. They wrote down 10% of the value of its US portfolio for the June 09 HY when most other REITs hadnt begun writing down or wrote down much less.
Once the commercial property market begins to turn, the writeups will be become much more aggressive than other REITs.
CER reported in its March 09 quarterly report the following: A number of retailers in the United States have entered into bankruptcy protection over the last year. Under this process, retailers have the ability to reject leases and close stores. For the period from July 2008 to March 2009, a total of 66 leases, including 16 Circuit City leases, 13 Linens ‘n Things leases, 12 Goody’s Family Clothing leases and five Steve & Barry’s leases, accounting for $12.5 million or 2.8% of annual base rental income, have been rejected in CER’s US portfolio.
Please note that loss of 2.8% ABR is from the period July 2008 to march 2009.
However the half yearly update from MDT says:
During the period, three tenants, Mervyns, Linens ’n Things and Circuit City, which contributed approximately 13% of the Trust’s annual base rent as at 31 December 2008, filed voluntary petitions for reorganisation relief under Chapter 11 of the United States Bankruptcy Code. Management has made progress on re-leasing vacant space resulting from the Chapter 11 filings.
Yes I am expecting a writedown, no doubt about that but the magnitude of the writedown will be much less than MDT's as discussed above. CER has much more grocery anchored tenants than MDT. Also, The FX writebacks as discussed on here before will soften the magnitude of the forthcoming NTA writedown.
Cheers
CER Price at posting:
9.9¢ Sentiment: Buy Disclosure: Held
