Property trusts prepare for next boom CAROLYN CUMMINS
September 29, 2009 - 12:59PM In the past 12 months the real estate investment trusts have made considerable progress in positioning their businesses for the next boom in the property market.
They needed to.
Last December, when the global financial crisis was heating up, banks held more than $190 billion of commercial property exposure. Of that, an estimated 14 per cent was held by foreign banks, prompting the idea of the Rudd Bank - but that came to nothing.
Over the course of the year, the REITs have raised about $20 billion through their investors, but there remains a further $50 billion of debt that will require refinancing in the next two years, mainly through the syndicated debt.
It was this debt, known as medium-term notes, which are unsecured, and commercial-mortgage backed securities (CMBS), which are secured by property assets, that brought the sector to its knees in late December 2007.
Centro Properties was the victim or, some would say, the cause of the collapse as it could not repay its mountain of CMBS debt.
But as economies get back on their feet, Australian REITs are paving the way again. As credit markets thaw even more, debt refinancing will be the favoured course of action.
In the latest deal, Macquarie CountryWide Trust has completed the first Australian issue of CMBS in two years, selling $265 million worth of notes.
The trust also said it had fully repaid the 2006 Australian dollar CMBS notes, using proceeds from the new issue, cash from recent asset sales and funds drawn from a debt facility.
The new securities, arranged by National Australia Bank, will have a triple-A rating assigned by both Standard & Poor’s and Fitch Ratings.
MCW’s chief financial officer Richard Di Lernia said the trust reduced the CMBS facility to $265m, leveraged to its Australian supermarket portfolio.
Westfield Group, which has already raised $US2.7 billion ($3.2bn) in the US since May, is a traditional bond issuer, and CFS Retail Property Trust also issued MTNs to raise $250m in May.
Dexus Property Group says it has opened a new source of capital with a $US300 million ($344 million) debt issue in the United States bond market.
The property manager said on Tuesday it had priced its inaugural issue of fixed rate senior unsecured notes at 99.582 per cent of the principal amount.
The notes were issued in the US 144A bond market with a coupon of 7.125 per cent for a tenor of five years.
‘‘Issuance into the US 144A market opens up a new source of capital, broadening our investor base and giving us increased access to long dated funding,’’ Dexus chief executive Victor Hoog Antink said.
Lend Lease also issued convertible bonds to raise $400 million for two of its Australian Prime Property Funds.
CNP Price at posting:
40.0¢ Sentiment: ST Buy Disclosure: Held
