AVJennings wants to raise up to $200m of equityNatalie...

AVJennings wants to raise up to $200m of equity

Natalie Craig
February 21, 2009
HOUSING developer AVJennings has taken the unusual step of launching an unlisted property fund at a time when investors are shunning the sector.

The company announced its intention to raise between $150 million and $200 million of equity to buy residential assets for the fund, after confirming a half-year loss of $9.7 million, compared with a $6.1 million profit in the previous December half.

Former chief financial officer Peter Summers was also appointed chief executive yesterday, after acting in the role since the resignation of Louis Milkovits in December. Mr Summers said he was confident wholesale investors would support the fund because it was a stable, long-term prospect.

"The fund has a 10-year profile. That means that it can buy on an orderly basis," Mr Summers said.

"People cannot really be worrying if they're entering into this fund in the right market cycle, because they're actually going to go through a couple."

The fund's launch and completion date is yet to be decided. It follows Ten Network's failure this week to raise $90 million in an equity placement.

Mr Summers said management fees and income from development and sales from the fund would give the developer more secure revenue streams, reducing its reliance on banks and other lending sources.

The company has not recorded an impairment in the value of its assets, unlike rival developers including Stockland and Mirvac, but says that is mainly because it bought when prices were much lower.

It has a $215 million debt facility maturing in September, and had drawn on $130 million at December 31. "At this stage we're covenant compliant," Mr Summers said when asked about the group's debts.

AVJennings did not pay an interim dividend last year, and will not do so this year. Investors got a full-year dividend of 2¢ last financial year. No guidance has been provided on a final dividend for this June.

Mr Summers said the half-year loss was mainly due to ongoing poor housing affordability and a lack of consumer confidence.

But sales to first-home buyers had improved in recent months, and the company's house and land products, which included smaller lots and townhouses, were suited to the first-home buyer market. No exact figures were available.

The first home buyers grant for people building will revert to $7000 from $21,000 on June 30. Mr Summers said he hoped it would be extended to ease consumer uncertainty.

"If there's no extension, it will be similar to before the GST was brought in. That brought forward a lot of demand, making people make buying decisions very early. That can also lead to constraints on supply," he said.

"What everyone needs is certainty sooner rather than later."

AVJennings shares closed unchanged at 27¢. They are down about 27 per cent on this time last year.