registery consolidation speculation

REITs bring units back from billions
Author: Carolyn Cummins
Date: 31/07/2010
Words: 351
Source: SMH
Publication: Sydney Morning Herald
Section: Property
Page: 20


REAL estate investment trusts expect consolidation of units to accelerate in coming months as they tidy their respective unit holder registers following last year's round of capital raisings.
To survive during the height of the global financial crisis, most REITs refinanced the balance sheets in April and May 2009 via equity issues to their existing investors.

But, in doing so, they created monster registers, with most now holding more than 1 billion and up to 2 billion units on issue. In some cases, that has kept a lid on the share price.

Many of the managers are now easing the pressure by consolidating units back to a more practical 500 million.

GPT and Australand led the way earlier this year, which led to their security prices doubling and now trading over the psychological $1 barrier.

Stockland, Westfield and Valad, among others, each have more than 1.5 billion units on issue and could look to reduce that in coming months.

Although it does not alter the underlying value or earnings outlooks of the trusts, it does make the vehicles more tradeable and attractive for institutions restricted by their trust deeds from investing in anything less than the $1 level.

Thus, the move to consolidate should create more activity in the sector, particularly at the lower-priced end of the REIT index.

Charter Hall Office REIT and Charter Hall Retail REIT are the latest to follow the scheme. The office trust announced its intention to undertake a 10-for-one unit consolidation, reducing its units on issue from 4.93 billion to 493 million. The trust's manager said its market capitalisation and net assets should not be affected.

For the retail REIT, the units on issue will be consolidated on a five-for-one basis, effective September 1. The consolidation will result in a reduction in units on issue from 1.5 billion to about 306 million, subject to adjustments for fractional entitlements.

Goldman Sachs JBWere analysts said there might be a perception among some that the REIT sector contained "penny dreadfuls".

"It could be argued that the benefit of a share consolidation may be partially psychological, in order to remove negative perception surrounding low share prices," the analysts said