This article is from the Australian Property Journal archive
THE Allco managed Record Realty Trust has released a three year program to sell $2.1 billion worth of assets in order to reduce its high gearing.
And, worst still for investors, Allco also announced it is exploring options for the potential sale of the entire trust.
The trust has targeted for sale include 22 properties in the United States, eight properties in Germany and 41 properties in Australia.
The properties in the US are leased to the US Government, the German assets to Deutsche.
The Australian portfolio include the ASX Building in Bridge St, Sydney, the Centrelink Building in Canberra, Shell House at 1 Spring St, Melbourne and 126 Margaret St, Brisbane.
RRT’s fund manager Ian Schilling said the trust’s high gearing levels has resulted in a negative fund cash flow position at a corporate level where interest expense and operating costs exceed the net income from the underlying portfolio.
“This plan is in the best interests of unitholders in light of the current market conditions and follows a comprehensive review of a range of potential models. It is important to note that we will only execute specific asset sales if they optimise the potential outcome for unitholders,” he added.
Schilling said selected asset sales will be targeted over the immediate term to reduce gearing levels and address potential debt covenant and liquidity pressures.
Based on asset realisations at December 31 2007 valuations, the proposed sales are expected to deliver net proceeds before disposal costs and debt break costs of around $316.6 million, after the repayment of asset level debt of $1.7 billion and corporate level debt of $150.8 million.
|
Property |
Dec 31 2007 asset value $A’000 |
Dec 31 2007 current debt $A’000 |
Dec 31 2007 implied equity value $A’000 |
|
US portfolio |
744,863 |
594,779 |
150,064 |
|
German portfolio |
587,544 |
494,420 |
93,124 |
|
Bridge Street, Sydney |
250,000 |
190,400 |
59,600 |
|
Spring Street, Melbourne |
90,000 |
60,381 |
29,619 |
|
Centrelink, Canberra |
109,000 |
85,664 |
23,336 |
|
King William, Adelaide |
50,000 |
23,425 |
26,575 |
|
Qantas, Mascot |
50,800 |
32,900 |
17,897 |
|
Reed Street, Canberra |
56,500 |
42,312 |
14,188 |
|
Mt Gravatt, QLD |
53,500 |
37,424 |
15,576 |
|
St Kilda Road, Melbourne |
42,000 |
31,455 |
10,545 |
|
Gosford, NSW |
50,000 |
38,1000 |
11,900 |
|
Margaret Street, Brisbane |
29,500 |
19,838 |
9,663 |
|
Warringah Road, Frenches Forest |
23,500 |
18,225 |
5,275 |
|
Subtotal |
2,1236,707 |
1,669,324 |
467,383 |
|
Corporate debt |
na |
na |
Na |
|
Total |
2,1236,707 |
1,820,121 |
316,585 |
|
* Note: Equity value calculations are prior to disposal costs and debt break costs / receipts. The equity released may differ if asset sale prices vary from the 31 December 2007 valuations. |
|||
And subject to the asset realisation program and repayment of the BOSI corporate debt facility and subordinated notes, distributions to unitholders are anticipated to recommence during the 2009 financial year.
“Only a small number of the initial asset sales targeted over the immediate future will need to be executed to alleviate potential RRT debt covenant and liquidity pressures. As a consequence, there should be no need for forced sales.
“A measured sale program targeted over a three year term is believed to be a reasonable timeframe for assets to be sold and equity returned to unitholders within a timely manner. This should allow sufficient time to ensure that the optimal value is secured for assets, therein maximising available returns to unitholders,” he continued.
Schilling said RRT’s closing price of 18 cents March on 27, represented an 80.0% discount to the trust’s Net Tangible Assets per unit as at December 31 of 90 cents.
RRT’s share price climbed 4.5 cents to close at 22.5 cents last Friday.
Australian Property Journal
