This article is from the Australian Property Journal archive
SOFTER capitalisation rates have weakened Macquarie CountryWide Trust's property portfolio which has seen a 3.6% decrease or $185.9 million fall in book value.
For the six months to June 30 2008, revaluations were undertaken on 265 properties of which 109 were independent and the other 156 properties were revalued by directors.
The trust’s chief executive Steven Sewell said the movement in the total portfolio value is the result of a 1.4% increase attributable to income growth and a decrease of 5.0% attributable to softer capitalisation rates adopted to reflect the generally weaker economic environment.
“The revaluation results are consistent with the quality of the trust’s portfolio. The properties are predominantly anchored by market leading grocery tenants, have above industry average same store net operating income growth, strong rental rate growth on new leases and renewals and average occupancy levels at greater than 96%.
“These factors have supported the valuations and, in part, mitigated softening capitalisation rates occurring more generally,” he added.
In Australia, valuations were supported by continued underlying income growth – driven by anchor tenant sales growth and strong specialty tenant rental growth via new leases and renewals, underpinned by the trust’s redevelopment projects. However, the trust’s Australian portfolio value decreased by $A58.6 million or 4.1% which implies a capitalisation rate of 6.9%. As at June 30, the portfolio was valued at $A1.37 billion.
In the United States, the revaluation of the portfolio saw the portfolio value decline by $A81.9 million or 2.7%. Cap rates were 6.7%. The portfolio was revalued at $A2.94 billion
Whilst in Europe, assets were revalued for the first time since acquisition in July 2007, values fell 7.3% or $A43.86 million to $A557.38 million. Cap rates were 6.9%.
The entire portfolio has been revalued at $A4.95 billion.
Sewell said importantly, subsequent to the valuations being adopted, the trust is not in breach of any property or trust level debt covenants.
The only Head Trust level covenant remaining is a ‘Minimum Net Tangible Assets’ level of $A1.8 billion, and based on current values of approximately $A2.4 billion, a significant buffer exists.
“The trust portfolio’s sound underlying property fundamentals have partially offset the movement in capitalisation rates that are used in valuations.
“However, management maintains a cautious outlook on valuations for the short term given the current economic conditions in the markets in which the trust operates,” Sewell concluded.
Macquarie CountryWide shares closed 1 cent higher at 90 cents yesterday.
Australian Property Journal
