Florence Chong | March 13, 2008MACQUARIE Bank has pleaded with...

Florence Chong | March 13, 2008

MACQUARIE Bank has pleaded with investors in its listed property trusts not to panic-sell shares after the four listed trusts collectively shed more than $3 billion since December.

Three Macquarie trusts hit new lows on Tuesday, with Macquarie DDR, Macquarie CountryWide and Macquarie Office Fund now trading at about a 40 per cent discount to net asset backing.

The only exception is Macquarie Leisure Trust, a consistently top performer, trading at a 25 per cent premium.

But unlike its sister trusts that are exposed to the US economic woes, its assets reside predominantly in Australia.

"It's time to take stock of where the fundamental values lie," Macquarie Group's co-head of Real Estate Capital Simon Jones told The Australian.

"We've been through cycles like this before. In a down cycle, we will do better (than others).

"In the short term, we're focused on restoring value to unit prices. We ask our shareholders not to panic and react to volatility. If they start to panic and sell out, this would be detrimental."

Mr Jones pointed out that the bank was also a co-investor in all its trusts, but Macquarie's head stock had seen its own market value sliced in half in only nine months.

Mr Jones said the average occupancy across the trusts was historically high at 97 per cent.

Their debt positions were well covered and the emphasis was on conserving capital and boosting liquidity through selective asset sales (Macquarie CountryWide put $100 million worth of Australian supermarkets up for sale earlier this month).

Last year, the bank's real estate division recycled $2.7 billion of capital from asset sales, including the $1.l8 billion sale of Macquarie Prologis Trust.

Macquarie has a 10 per cent stake in Macquarie Countrywide (MCW), 7 per cent in Macquarie Office (MOF), 5 per cent in Macquarie Leisure (MLE) and 2 per cent in Macquarie DDR. It has so far lost $135 million on its investment in the four trusts.

As well, the fee income Macquarie Group earns from managing the trusts -- fees are linked to performance -- have fallen.

MOF has been the hardest hit.

In the past 12 months, its unit price dropped from a high of $1.75 in May last year to 81c on Tuesday. Similarly, MCW dropped from a high of $2.30 last June to 96c this week.

The Macquarie trusts have been sold down along with the rest of the sector, but the negative sentiment was compounded by Macquarie's strong presence in the troubled US market.

JP Morgan's banking analyst, Brian Johnson, said with Macquarie Group assets totalling $240 billion, the impact of the fall in fees from property management would not be significant.

Its total property assets under management is $32 billion.

The Macquarie trusts began diversifying out of the US 18 months ago to go to Europe and Asia, Mr Jones said.

As a group, Macquarie has already made the big shift away from the US to Asia.

The US represented 29 per cent of its total property assets at December 31, 2007, down from 49 per cent in the previous year.

By contrast, Asia moved from 20 per cent at December 31, 2007 to 29 per cent in the first half, while Australia and Europe remained roughly stagnant at 23 and 7 per cent respectively.

"We'll look to find the best opportunities, whether listed or unlisted, to create funds in Australia and particularly offshore," Mr Jones said.

"We're working hard in Japan to establish a logistics trust and we will wait to see if anything comes out of that."

Although its Macquarie Real Estate Equity Funds (MREEF) series of unlisted trusts have assets in China, Mr Jones said new Chinese regulations on funds management made it difficult for a foreign fund to be set up in China today.