Listed Property Trusts

[Lizard]

Hi RRR,

I think I bought around 80cps back when it was CHP (Calan Healthcare). I guess property trusts aren't that exciting - mostly just owned for the income and a bit of upside if timed right.

In some ways, it is good to see a property trust investing in more property at the cyclical lows, rather than the nasty habit they have of selling into the lows and buying the highs in order to manage distributions and debt covenants. However, the problem I have is that they are buying into Australian property - which is hardly at the same cyclical low and nor is the currency . On that simple basis, I'd question whether the investment has much to add longer term, other than to the (asset based) management fees.

Either way, I find it hard to get passionate about the property stocks - I tend to keep a few for a rainy day. I don't see much need to own more - so any investment in the cap raising will probably not be for the long term.

[johndeyell]

Westfield Group, the world's biggest owner of shopping malls, will create a new retail trust that will raise A$3.5 billion and own a half stake in its centres in Australia and New Zealand.

The group, chaired by high-profile businessman Frank Lowy, will seek a separate ASX listing for Westfield Retail Trust, which will gross assets of A$12.2 billion.

The new trust will own a stake in 54 malls, including 42 in Australia and 12 in New Zealand.

The transaction would start with capital distribution to its security holders of A$7.3 billion by way of units in the new trust.

Westfield retail would then raise up to A$3.5 billion offering new units, with A$1.75 billion underwritten by Citi, Credit Suisse and Morgan Stanley.

The public offer element is to be $2 billion and Westfield security holders will be offered units worth A$1.5 billion.

The new trust "responds directly to significant market demand for a domestic trust focused on investing in high quality retail real estate, with conservative gearing and income sourced primarily in Australian dollars," Lowy said in the statement. "

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The restructuring will reduce Westfield Group's net debt by A$4.4 billion and reduce its future capital needs, it said.

The retail trust will have its own board and management team while Westfield Group will act as responsible entity, property and development manager, without charging a fee, the statement said.

After the restructuring, combined per-security earnings in 2011 are forecast at between 92.9 Australian cents and 93.1 cents.

That would be made up of 74.6 cents per Westfield Group unit and between 18.3 cents and 18.5 cents for Westfield Retail.

The 54 shopping centres hold some 13,195 retail outlets across Australia and New Zealand.

They generated 550 million shopping visits and A$22 billion of retail sales, Westfield said.

Shares of Westfield Group were unchanged at A$12.81 on the ASX, having been halted earlier for the announcement. They have dropped 1.3% this year.

Westfield Group has 119 malls worldwide and some A$61 billion of assets.

Investors in Westfield Group will vote on the spinoff plan on Dec. 9.

[CJ]

The retail trust will have its own board and management team while Westfield Group will act as responsible entity, property and development manager, without charging a fee, the statement said..

A property trust with no fee. Sounds like gold.

I wonder what yeild it will launch at.

[fungus pudding]

A property trust with no fee. Sounds like gold.

I wonder what yeild it will launch at.

Does using their own staff cost any less, or produce better results, than having an external manager? I supose it all depends on the mangement contract, but it's an interesting question.

[CJ]

Does using their own staff cost any less, or produce better results, than having an external manager? I suppose it all depends on the mangement contract, but it's an interesting question.

To me it sounds like Westfeild Ltd will be taking on some responsibility and not charging for it. Even companies with an external manager would still have a board of directors.

It will also be interesting to see if the Trust can decline to do refurbs, new asset acquisitions, etc if they think it is not in there interest (but is in Westfeild Ltd interest).

[johndeyell]

I've been trying to download the info from www.westfieldretailoffer.com but there seems to be a broken link or something for the download, can anyone else access it?

[macduffy]

The key to this is of course the values at which the properties are transferred from Westfield to the new trust.

We musn't overlook the fact that the major driver of this is to reduce Westfield's debt.

[johndeyell]

The key to this is of course the values at which the properties are transferred from Westfield to the new trust.

We musn't overlook the fact that the major driver of this is to reduce Westfield's debt.

Well they would have to be sold at current market value. That's not necessarily a bad thing, the current market value of the properties is probably quite favourable for the trust to acquire them at.

[macduffy]

Well they would have to be sold at current market value. That's not necessarily a bad thing, the current market value of the properties is probably quite favourable for the trust to acquire them at.

Yes, but arriving at a current market value for such thinly traded properties leaves a fair bit riding on the valuer's opinion. Put up to tender/auction they might fetch quite different prices.

[RRR]

Thanks Lizard-Yes, Ozzie property market is expensive and the currency is high. But they will be earning rentals in Australian $ and well shielded from the recent depreciation tax laws in NZ-that is a positive I would have thought. Management fee will come down to 0.60%(from 0.75%)-of course we all know how these managers of LPT's operate and their conflict of interest with shareholders.