Trusts Strapped In For Rollercoaster Ride
Sydney Morning Herald
Wednesday March 26, 2008
PROPERTY managers have warned that listed trusts will have to endure a worsening ride before the market settles.
The warning was made as $4 billion in assets was earmarked for sale to anyone who can raise the cash to buy.Last year more than $14 billion worth of deals was done in Australia, the highest on record, but with the global credit crisis deepening, property worth almost a third of that amount is being offered back to investors in on- and off-market deals.The global credit squeeze is rationing the supply of potential buyers. The head of direct property with Perpetual Investment, Goran Ujdur, has warned that for highly geared trusts (most in the ASX 200 property trust index have gearing at more than 50 per cent), things will get worse before they get better.The assets being offered so far are A-grade office towers in Sydney, Perth and Brisbane; large and small shopping centres - excluding, for the time being, the Centro properties in its two unlisted wholesale funds - and a smattering of Defence land for redevelopment.There is also the sale by MFS of its Sheraton Mirage Resort, Mirage Country Club and Golf Course, the Bale Resort and two development sites. The recently listed hotel group Hedley Leisure & Gaming Property Fund, controlled by the Cairns businessman Tom Hedley, is said to be looking to offload its $1.2 billion pub empire. The retail landlord Centro and the Allco-managed property trusts have $2.2 billion and $1 billion of Australian property up for sale respectively, although some of the assets are in trusts that need to be unwound to make the sales more palatable. Civic Tower at 66 Goulburn Street, Sydney, is another site that is for sale, for about $108 million."Buyers are smelling blood, so they are sitting on the sidelines and waiting," Mr Ujdur said. "Many of these vehicles will have to sell good assets just to stay afloat."Mr Ujdur said cash was king, so "superannuation funds, sovereign wealth funds and cashed-up private investors who sold major portfolios in the past two years (such as Lang Walker, Kevin Seymour and the Besen/Berger families) will be in a strong position" to buy good assets at reduced prices."Our current view is that opportunities will emerge in both global and and domestic markets."Already some are appearing, and one interesting observation is the convergence of private and public ownership of property. It is likely there will be more merger and acquisition activity as the cycle plays out."Knight Frank's NSW research manager, Selina Poyner, has identified about $3.2 billion of office investment-grade assets nationally that are in the investment pipeline. This excludes the hangover from big portfolio sales last year.Ms Poyner said about half of this space was being marketed off-market. "Owners who don't need to sell generally aren't. Value-add purchasers who have been active over the last three to four years are looking to sell assets to realise the gain. This is only achievable by selling off assets."One of the largest portfolios in the market is Macquarie Countrywide's shopping centres, worth $100 million and being marketed as the mid-Atlantic portfolio. The sale proceeds will be used to retire borrowings.The chief executive of Macquarie Countrywide, Steven Sewell, said the properties for sale represented about 10 per cent of Macquarie Countrywide's Australian portfolio. They ranged in value from about $3 million to about $20 million, which would suit individual investors or small syndicates.A director of Taylor Nicholas, Peter Taylor, is advising on a lucrative development site in Parramatta. The 8372-square metre property once housed Department of Education and Training offices. It is being sold by the NSW Government as part of its decision to release land back to the public. Mr Taylor said potential buyers would be able to redevelop the site into medium-density residential, or health and aged-care, accommodation.Investa Property, now owned by the US investment bank Morgan Stanley, is in the process of offloading 13 properties, of which five are unsold. It is understood 310 Pitt Street, Sydney, is being offered to potential parties. That entire portfolio was valued at about $1.3 billion.St George Bank recently appointed Macquarie Capital to consult on the sale of its site at 182 George Street, which backs onto 33-35 Pitt Street in Sydney's CBD. The sale is part of a larger site, and selling the asset is among the options to be considered.The newly private Multiplex Brookfield is continuing with its asset sale program of office blocks in and around Sydney, said to be worth about $1 billion.Allco has already put up for sale its half share of the Ernst & Young building at World Square, which is owned by the Allco Singapore Real Estate Investment Trust.The vehicle has a 50 per cent stake in each of the Ernst & Young Centre and World Square retail complex and public car park in Sydney and in Neeta City shopping centre in Sydney. These assets are being marketed for more than $400 million.In Brisbane Westscheme's Brisbane Square office building is said to be on the market for up to $400 million, while Jones Lang LaSalle Hotels has been appointed on behalf of Cbus Property, the direct property investment arm of the industry superannuation fund Cbus, to sell the Hotel Lindrum in Melbourne and the Harbour Rocks Hotel in Sydney.
© 2008 Sydney Morning Herald
