Ann: 2009 Unitholder Briefing Chairman and CEO ad, page-5

re: Ann: 2009 Unitholder Briefing Chairman an... Hi all,

As correctly pointed out by VLV there's nothing new in today's unitholder briefing, however this is not necessarily a bad thing. Who would've have thought this time last year that this would be the tone of the unitholder briefing? Certainly not me, for a start I expected there to be a lot more pressure from lenders enforcing loan covenants, and never in my wildest dreams would I have thought then that less than a year later we (and the commercial REIT sector generally) would be extending debt facilities maturing in 2008.

The thing that I was looking for today was to get a sense of how much pressure we are under from lenders with regards to; refinancing debt, breaches of loan covenants etc. It's becoming more apparent that lenders (and particularly the banks) do not want call default on loans for LVR covenant breaches, they are more interested in the ICR and our ability to service the debt facilities. Quite simply put there are too many highly-geared REITs for lenders to be calling default for LVR covenant breaches alone... why? Well the answer's simple, they don't want to take possession of these properties & then have the hassle of having to sell and/or manage them.

There are 2 paragraphs that give me a lot of confidence that we are not going to come under HUGE pressure from our lenders to take drastic measures in order to renegotiate debt facilities with short maturity dates, and they are:

1.) "We have had some success with asset sales during the year as I will outline shortly. However, some of the pricing we received to sell assets was opportunistic and proceeding with some of these sales was not in the best interest of our unitholders and our lenders".

2.) "The Trust has focused on selling assets to reduce our debt levels, and over this 18 month period we have successfully sold over US$200 million with all proceeds used to retire debt.
We continue to work on this strategy and expect some further smaller sales to complete in early 2010. These sales are designed to reduce near-term debt while we focus on holding the majority of our portfolio seeking to lease up existing vacancies and improve its value".

The fact that we are not being forced to sell properties at severely distressed prices is very comforting. Provided that we keep our NOI & ICR at acceptable levels & we continue to sell selective assets to reduce debt, IMO I expect that our lenders will continue to give us a bit of latitude on our gearing levels (currently 76%), also taking into consideration the state of the REIT sector & the economy generally.

It was interesting to note that there weren't any US Directors present at the unitholder briefing today. I'm not sure what to think other than I hope their back in the US working with our lenders on refinancing debt facilities, or selling Mervyn's sites ;-)

I have a bit more to say, but I have to go. I'd be interested to hear other peoples thoughts on what they think about today's briefing compared with last year's, and what they were expecting or hoping to see this year.

Back soon.

Cheers.