Macquarie Will Use Office Sale Returns To Cut Debt
Sydney Morning Herald
Saturday April 12, 2008
ASSET sales by Macquarie Office Trust during the week received a mixed reaction from investors and property analysts.
But they agreed that the prices received, which were above book values, were a positive sign for the commercial market. Macquarie Office sold 505 Little Collins Street, Melbourne, for $83 million, a significant premium to the book value of about $40 million. The proceeds will be used to reduce debt and gearing levels. The trust's chief executive, Adrian Taylor, said the sale was in line with the group's strategy. "We will continue to make selective asset sales where it makes sense," he said. "The sale of 505 Little Collins Street represents a strong result for investors. Proceeds from this transaction will be used to further strengthen the balance sheet. "In three months to March 31, 2008 the trust has leased 46,288 square metres of its assets or 4 per cent of the total portfolio, including 18,711 square metres under letters of intent, while rent reviews increased an average of 4 per cent and delivered $3.1 million of additional revenue." Mr Taylor said there was continuing demand for premium office accommodation offered by the trust's global portfolio. Goldman Sachs JBWere's analysts said the Melbourne sale was positive. "With the proceeds of the sale going to retire debt, we see this strengthening the trust's capital position," the broker said. "At a 16 per cent premium to the book value, the Little Collins Street sale is a particularly good result. "We see Macquarie Office as having been unfairly placed in the same category as other real estate investment trusts/property companies in financial distress." Goldman Sachs JBWere said it believed the market would reward any manager that sought to reduce gearing from current levels. Merrill Lynch's analysts were less enthusiastic and downgraded the stock to a sell. "Given its 51 per cent exposure to US office fundamentals, the trust will struggle to de-gear [reduce debt] and continues to face long term issues including yield support from hedging benefits," Merrill Lynch said.
© 2008 Sydney Morning Herald
