This article is from the Australian Property Journal archive
NEGATIVE economic growth and weak confidence in the United States has continued to impact on the Tishman Speyer Office Fund, which is now looking to sell off its assets.
TSO delivered funds from operation of $A34.18 million for the 12 months to June 30 – down from $A69.46 million in FY09. The result adjusted to include non-cash items and revaluation was a loss of $A17.91 million which is an improvement from the previous corresponding period’s loss of $A525.60 million.
Independent valuations were obtained for all 16 assets in April with 300 Park Avenue and CitySpire revalued again in June 2010, resulting in a gross property value of $US1.37 billion, representing a 4.0% increase since June 2009 when adjusted for assets sold during the period.
At June 30, the Net Asset Value per unit was $A1.20, compared to $A1.17 for 30 June 2009. The fund’s gearing at June 30 was 72.2%. The net tangible assets of TSO at June 30 were $0.74 per unit (30 June 2009: $0.85 per unit). After adjusting for the deferred tax liability and fair value movements on derivatives, net tangible assets at June 30 were $1.20 per unit (30 June 2009: $1.17 per unit).
At June 30, TSO held assets with a value of $1.20 billion (June 2009: $1.24 billion).
The responsible entity, Tishman Speyer Australia Limited has announced its intention to pursue a strategy to fully realise TSO’s assets, in an orderly and efficient manner, over the medium term (in line with the liquidation of the Prime Plus Portfolio), with capital to be returned to unitholders.
Tishman said the economy has begun to stabilise in the 12 months to June 30 and it appears that the economy is staging a recovery.
However, in the meantime, negative economic growth and the associated decline in confidence and employment have had a significant impact on leasing activity across TSO’s major markets in the US, and has resulted in increasing vacancy levels, falling rents and increased concession packages on the whole.
Despite this, TSO has signed 132 leases covering 1,204,800 sq ft. Notwithstanding this leasing success, the portfolio recorded 259,800 sq ft of negative absorption resulting in the portfolio being 88.3% leased, 3.3% lower than the position at 30 June 2009.
227 West Monroe, 300 Park Avenue and Bala Plaza were the main contributors to the portfolio’s reduced occupancy. 300 Park Avenue’s occupancy declined 5.2%, or approximately 40,000 sq ft. Also, 227 West Monroe had 115,600 sq ft of negative absorption, led by Excelon (41,000 sq ft), Pepsi Co. (33,100 sq ft), and Elite (29,100 sq ft) vacating their spaces and Citibank (28,300 sq ft) downsizing their space. Last, Bala Plaza had 72,900 sq ft of negative absorption, with Keystone Shipping (10,900 sq ft) downsizing their space, while MCI Worldcom (34,300 sq ft) and St. Joseph’s University (14,400 sq ft) both vacating the property.
TSO said no distribution will be paid for the period and it forecasts that it will remain that way in FY11.
Looking ahead, TSO said its focus is to preserve cash and meet loan obligations including obtaining a one year US REIT facility term extension and focus on a solution to the May 2012 US REIT loan maturity date.
Australian Property Journal