interesting article

Article from: The Australian
(http://www.theaustralian.news.com.au/business/story/0,,25444885-643,00.html?from=marketwatch_rss)

AFTER Michael Cameron took the reins of the vulnerable and once venerable listed property trust (LPT) two weeks ago, investors wasted no time telling him what he wanted him to do: find more capital, pronto.

It's apt that the first major act of the former St George and Commonwealth Bank banker was to announce a $1.2 billion to $1.67 billion raising, elevating GPT from LPT basket-case to one of the lowest geared in the sector, with a 25 per cent debt-to-equity ratio. GPT raised $1.6 billion last year, not nearly enough as it happened.

GPT hasn't stipulated what it will do with the kitty. Some property gurus believe that with $1 billion of cash on balance sheet and a $1.5 billion asset sale program in progress, GPT didn't need to do the raising, struck at a 26 per cent discount to Wednesday's closing price and a beefy 63 per cent discount to net tangible assets.

But with $2.1 billion up for refinancing in October 2010, the mere presence of the extra dollars means the trust can stare down its bankers and dispose of assets in an orderly way. "GPT now has much more control over its own destiny and much more control dealing with the banks," Cameron says. "We won't be perceived as a forced seller. It puts us in a better negotiating position."

Cameron adds the raising will allow GPT to deal with its joint venture with Babcock & Brown International (BBI), the disastrous European foray that involved picking up exciting assets such as apartments in rust-belt German towns (although unlike its parent, BBI isn't in receivership).

Cameron says GPT's share price has been weighed down by concerns over whether it can exit the highly geared venture, which many analysts value at zero even though there is supposedly $1.1 billion of remaining equity.

Strategically, the whip-around means GPT can more quickly revert to its good old operating model of owning quality buildings and collecting rent. GPT boasts a $13 billion portfolio of local retail, office and industrial buildings and also manages $5.3 billion of funds via its wholesale and shopping centre trusts.

GPT units are in trading halt, but we reckon GPT's 50,000 holders should avail themselves of the 26 per cent discount because the offer is, well, cheap. A lame rationale perhaps, but recent raisings have been well received elsewhere. Steelmaker BlueScope's shares closed yesterday at $2.52, well above the $1.55 a share subscription price for its $1.4 billion raising.

GPT's raising is not the first in the latest round of LPT raisings, in that Valad last month pulled together $750 million. Merrill Lynch nominates GPT, Stockland (SGP) and the Goodman Group (GMG) as the "most likely candidates to raise equity in the short term". Sure as eggs, GPT won't be the last.