INVESTORS in real estate investment trusts are bracing for another round of capital raisings to help fund the next phase of bank refinancing.
The sector is facing a bill of $24 billion for repayments over the next two years with only $17 billion in the kitty, according to research by JPMorgan.
Likely to tap shareholders for more cash include Goodman, Stockland, FKP, GPT, Macquarie CountryWide Trust and CFS Retail Trust.
But they face an uphill battle to persuade investors to part with more money just months after capital raisings and when the sector has fallen about 30 per cent in value this calendar year.
The banks are telling the property trusts that they must show some commitment that they are not relying solely on borrowing to control their debt levels. That commitment comes in the form of asset sales and tapping investors through capital raisings.
But JPMorgan's property analysts also said that trusts such as Stockland, which have relatively low debt levels, have the option of asset sales to help ensure long-term survival.
The trusts are expected to begin advertising campaigns soon to prove to financiers that they are serious about selling assets to raise money.
While asset sales will lead to potential dilution of earnings in the short term, it is a better option than having to raise further equity at a heavy discount.
About $8 billion has been raised via the sharemarket over the past six months by Stockland, GPT, Goodman and Commonwealth Property Office Fund. However, most of that has been eroded by a drop in asset values.
Goldman Sachs JBWere's analyst, Peter Zuk, said he expected more capital raisings would be done under duress to appease lenders.
In the case of Goodman, Mr Zuk said possible hurdles were the attitude of the banks that provided funding to the group's managed funds, the mindset of investors within the wholesale funds, and whether there was a high demand for redemptions.
Goodman has $460 million in repayments due to the banks by the end of next month and is widely expected to tap the sharemarket for funding soon.
"In our view, the appointment of corporate advisers, of McGrath Nicol and KPMG, is a sign that the banks are double checking to ensure there are no hidden issues lurking before deciding on Goodman's refinancing fate," Mr Zuk said.
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