Mirvac’s shares closed steady last night following the company’s announcement of a $215m impairment on zero-margin projects and unsold stock in poorly performing regional markets.

The property trust said it would expand its undeveloped land sales program, which would cut capital expenditure by $312m, secure about $70m from the sales and return the company’s development division profit margins to normal levels of about 20 per cent by 2014.

In a research note, property analysts John Freedman and Tom Bodor of UBS said the risk of further provisions was greatest for developers involved in lifestyle, regional or premium luxury projects, which included Stockland, Australand and Lend Lease.

But Mr Freedman said because Stockland had announced it was exiting the apartment market altogether, it meant management “didn’t hold back” on writedowns during 2008 and 2009. Stockland still had apartments to sell down, such as those in its luxury Sydney apartment development The Hyde, but any writedown was likely to be proportionately small, UBS said.

The risk for Stockland was more that revenue from apartment projects would take longer to secure than anticipated.
In 2008 and 2009, Stockland took charges against its residential division and apartment businesses of $425m, including a $110m impairment on its Wallarah residential project in Lake Macquarie, NSW.

UBS said that Stockland had about $360m of inventory in apartments, including $108m in land, as at June last year.

At Australand, only 10 per cent of inventory, which was worth about $870m, was in the lifestyle category.

Date: 28 January 2011 | For the full report, please visit http://www.theaustralian.com.au

The aftermath of the credit crisis has spawned an unusual opportunity for the recapitalised listed companies as smaller, under-capitalised developers struggle to get finance for projects.

UBS head of real estate John Freedman said the chance would remain as long as bank financing was constrained for developers.

He said the large listed companies were funding projects from their own balance sheets.

Smaller developers, who relied on bank financing, were expected to pre-sell 50-70 per cent of a project before their banks would fund the development.

“The overall market may have slowed but the market share of the larger players has picked up, enabling them to post solid growth,” he said.

Mr Freedman looked at the five larger listed property groups with residential development operations and found they had already chalked up an 82 per cent lift in the value of pre-sales.

Mirvac entered the 2010-11 financial year with deposits for contracts totalling $802 million.

Stockland, which plans to eventually exit high-rise apartments, had signed up pre-sales of 539 apartments — up 157 per cent over the previous year. But Mr Freedman said most of their pre-sold apartments would have settled by now.

Australand’s pre-sales rose 201 per cent to 829 lots by June 30, 2010.

A spokeswoman said that by the third quarter, Australand had signed almost 1200 contracts.

She said this was a substantial increase, considering that the typical number of contracts signed in a year was about 300.

Lend Lease has chalked up pre-sales totalling $673m.

In fact, the company’s financial year began with 167 per cent higher apartment pre-sales than a year ago.

Hugh Martin, executive director of Vivas Lend Lease — the group’s apartment business — said the company was currently developing 7000 apartments in several projects, including the final phase of Jacksons Landing in Sydney’s inner west.

Mr Martin said demand had been strong in all its projects.

Date: 28 December 2010 | For the full report, please visit http://www.theaustralian.com.au

Australand is the company that is developing Googee Beach and have now applied to put hundreds of additional houses there. What that will mean for the promised public spaces, board walks, etc. remains to be seen, if they get the approval from Cockburn council to change their plans.

I am skeptical about large developers because they often seem to want to change their plans after initial approval has been given.

Be alert and alarmed Fremantle!

Roel Loopers

AUSTRALAND Property Group said yesterday that its residential division bagged about 780 contracts worth over A$318 million (S$409 million) in wholly owned and joint-venture projects in Melbourne and Sydney in the third quarter of this year.

As a result, the division exchanged a total of about 1,800 contracts (for land, housing and apartments) with sales revenue of about A$700 million in the first nine months of this year.

As at Sept 30, 2009, the residential division had 14,500 lots in its development pipeline comprising land communities, housing and apartment developments.

‘The pipeline is geographically diversified across the capital cities of Australia’s eastern seaboard and Perth,’ Australand said in a Q3 2009 property update issued yesterday, ahead of its parent CapitaLand’s Q3 financial results statement to be released today.

Australand does not issue quarterly financial results; it releases them only at full year and half time.

‘First-time home buyer demand is slowing with the winding back of the first home buyers boost at the end of September.

‘However, interest from second and third time buyers and investors has significantly improved on the backdrop of improved consumer sentiment and the positive outlook for the Australian economy,’ it added.

Between June 1 and Aug 31 this year, median home prices increased in all key capital cities with the strongest growth seen in Melbourne (up 5 per cent), with Sydney posting 2.8 per cent growth, buoyed by strong population growth and continued undersupply of new dewellings. Perth also saw a 4.1 per cent rise in line with the strong sentiment for the resources sector in Western Australia.

Australand’s commercial and industrial division has leased 88 per cent of Freshwater 28, Southbank, Melbourne.

The office development was completed late last year.

‘In the last quarter, the industrial land markets in Victoria and Queensland have experienced renewed transaction activity and Australand has sold approximately 150,000 sq metres of land,’ the group said.

Its investment property division also achieved successful leasing of several key tenancies including Diageo (15,000 sq m) at Erskine Park, Sydney, and CSR (10,000 sq m) at Melbourne Airport Business Park, Tullamarine.

Asset sales totalling A$150 million have been completed in the past 12 months by the division.

‘The appetite for investment property is improving with private buyers dominating acquisitions under A$30 million. Whilst institutional interest remains limited at present, there are early signs that institutional demand may re-emerge in 2010,’ Australand said.

The group also confirmed its guidance, previously provided at the half year, that the 2009 group operating profit after tax, excluding unrealised gains/losses from property revaluations and impairments, is expected to be about A$120 million.

It expects to pay a further distribution of two Australian cents per stapled security for the second half, resulting in a full-year distribution of five Australian cents for the current financial year.

Source : Business Times – 27 Oct 2009

CapitaLand’s Australian unit AustraLand said today that it raised about A$461 million through a share entitlement offer

The Sydney-based company sold 769 million new stapled securities in a non-underwritten 1-for-1 offer at 60 Australian cents each.

In a filing with the Singapore Exchange, Australand said it sold the stock to recapitalize its balance sheet, cut debt and provide funding for its development pipeline.

In line with its revised policy announced in July, the company also said that its forecast distribution for the six months ending December 31st is expected to be about 3 cents per stapled security.

Australand, which is 59% owned by CapitaLand, will resume trading today

Source: 938Live

SINGAPORE – This was the result after CapitaLand’s indirect wholly-owned subsidiaries, Ausprop Holdings and Austvale Holdings, were allotted a total of 502.8 million new stapled securities in Australand under the institutional entitlement offer of a one-for-one rights issue in Australand at the issue price of A$0.60 per new stapled security.

The total subscription price of about A$302 million (S$392 million) was paid in cash, CapitaLand said in a filing to the Singapore Exchange.

The final retail entitlement offer of the rights issue is expected to complete on September 9, upon which CapitaLand will then make the appropriate announcement on its final interest in Australand and the financial impact of the rights issue on the CapitaLand group, the company said.

CapitaLand shares closed lost 23 Singapore cents – or 4.7 per cent – to close at S$4.71 on Monday.

Source: Business Times

Property trusts value their assets based on a capitalisation rate or ‘cap rate’. The concept is simply to value the asset such that the rent received provides a return equal to the cap rate. If you’re receiving $100 rent a year and your cap rate is 10%, you value the asset at $1,000.

For years cap rates have been tumbling (see chart below) in line with falling interest rates and, supposedly, lower risk. As a result, property trusts across the board have been booking massive profits and increasing net ‘tangible’ assets.

Welcome to 2008. Interest rates are up, inflation is out of the bag and, thanks to the credit crisis, risk premiums are through the roof. That being the case cap rates should go back up by a lot more than the pathetic 25 basis point (0.25%) rises by Australand and Mirvac (Lend Lease didn’t fess up about their assumptions but the extent of the writedown wasn’t significant).

Bunnings Warehouse Trust at least went with 50 basis points, but that only takes their cap rate up to a meagre 7.08%. Whatever planet they’re on, it’s not the same one as the rest of the financial markets – who does anything for a 7% yield these days? The cap rates should be 2% higher, at least.

So why aren’t they? The problem is that if they were, truly massive writedowns would be required. Every 1% increase in cap rates translates to a writedown of about 12% in asset value. Across the 16 property entities covered by The Intelligent Investor, a 200 basis point rise in cap rates – which would only take them up to about 9% on average – would result in $30bn of losses, a figure that the managements of these trusts have chosen not to face.

But they may as well get on with it. The sector is trading at a massive discount to reported NTA, which is the stockmarket’s way of saying you’re not fooling anyone.

CAPITALAND has no plans to take its Australian subsidiary Australand private at present as it remains a core business, CapitaLand’s group president and CEO Liew Mun Leong said yesterday.

Australand chairman Lui Chong Chee said he expects CapitaLand’s stake in Australand to rise from the present 54 per cent to about 65 per cent at most, assuming no retail investors participate in a recently announced rights offer.

Australand, which is listed on the Australian and Singapore bourses, has announced a one-for-one renounceable rights issue to raise between A$302 million (S$386.5 million) and A$557 million to strengthen its balance sheet.

Mr Liew said: ‘They have done well for us for 11 consecutive years. We’re confident in the business and management of Australand and we’re taking up our pro-rata entitlement of A$302 million.’

Mr Liew also clarified that while Australand is keen on expanding into Asia, it is eyeing the logistics and industrial property sectors in the region, rather than residential and commercial properties, where it could run into potential competition with CapitaLand itself.

‘They are very strong in industrial and logistics and want to export these services to Asia,’ he said. ‘We have the connections and ability to source the land. They are not coming to Asia to build apartments or build a Raffles City.’

Earlier this year, CapitaLand and Australand set up a 51:49 joint venture to set up a pan-Asian development platform in the industrial and logistics sectors.

Mr Lui said provisions for foreseeable losses taken by Australand in H1 2008 were specifically for New South Wales, mainly Sydney. ‘The volume of (home) sales in Sydney has come down,’ he said.

‘But if you look at the rest of Australia – Perth, Melbourne and Brisbane – the prices there are still quite stable.’

CapitaLand chief investment officer Kee Teck Koon highlighted that Australand has been increasing its exposure to the commercial and industrial property sectors, which offer more stable income, to reduce its dependence on the residential sector.

CapitaLand’s CFO Olivier Lim also indicated that CapitaLand may book a negative goodwill gain from the Australand rights issue. The issue is priced at 60 Australian cents per rights share – lower than Australand’s post-rights offer net tangible asset per share of A$1.13 to A$1.28.

Source: Business Times

CapitaLand’s Australian unit Australand said on Thursday that its recently-formed Australand Residential Development Fund – which is a joint venture between Australand and BOS International (Australia) – has been selected as the preferred organisation to purchase and develop a 6.28 hectare riverfront site in the Brisbane suburb of Hamilton.

This follows a two-stage selection process run by the Port of Brisbane’s Northshore Development Group.

The fund will acquire and develop the project over the next eight years, subject to the satisfactory finalisation of commercial terms, Australand said. The fund will utilise the equity and debt financing currently in place, the company added.

‘Developing Northshore Hamilton through the Residential Development Fund will allow us to increase Australand’s residential pipeline in Queensland, especially in the strong Brisbane market, without the need for additional capital,’ Australand managing director and chief executive Bob Johnston said in a filing to the Singapore Exchange. — UMA SHANKARI, BT NEWSROOM

Source: Business Times

CapitaLand’s Australian unit Australand said it has raised 364 million Australian dollars from existing institutional shareholders.

In a filing with the Singapore Exchange, the firm said institutional shareholders were sold stocks at 60 Australian cents apiece.

It also plans to raise another 121.8 million Australian dollars from retail investors.

Shares of the company tumbled to a record low when trading began in the Australian Stock Exchange

It dropped 21 percent to 77 Australian cents, suffering the biggest decline since it started trading there in 1997.

CapitaLand, which owns 54 percent of Australand, had reported that net income fell 79 percent, prompting it to sell new shares to pay debts.

Some 775 million dollars of Australand’s loans were due to mature at the end of the second quarter.

It was also affected by poor home sales in Australia due to higher interest rates and lower demand.

Last year, Australand made about half of its revenue from home sales.

Source: 938Live

CapitaLand’s Aussie unit’s half-year earnings slide 79% to A$25.6m

PROPERTY revaluation and project writedown have resulted in CapitaLand’s Australian subsidiary, Australand, reporting a 79 per cent year-on-year fall in net profit to A$25.6 million (S$33.4 million) for the half-year ended June 30, 2008.

Earnings per stapled security for the period – based on profit attributable to the stapled security equity-holders – was 2.8 Australian cents, down from the year-ago period’s 12.9 Australian cents.

Dividends/distribution per stapled security for the half year were maintained at 8 Australian cents.

Australand said that investment property assets had been revalued at June 30, resulting in a net reduction in asset value of A$7.3 million.

It also said that carrying values of residential assets had been reviewed in light of the current market conditions resulting in a writedown of A$34.7 million (net of tax).

The assets are located predominantly in Sydney which Australand says has continued to ‘suffer more difficult market conditions with no improvement forecast in the short to medium term’.

Excluding the unrealised losses arising from property revaluations and the writedown to the carrying value of residential development projects, half- year operating profit rose 6 per cent on the prior year to A$67.5 million, said Australand. Earnings per stapled security, on an operating profit after tax basis, were 7.3 Australian cents, up from 6.9.

Australand, which has businesses in various property segments, reported that revenue from continuing operations rose 6 per cent to A$436 million for H1’08 from A$410.1 million for H1’07.

Commercial and industrial development profit before tax (PBT) was A$46.4 million for H1’08, up 93 per cent from A$24.1 million for the year-ago period.

Investment property PBT for H1’08 was A$64 million, up 20 per cent from A$53.5 million for H1’07, excluding asset sales and unrealised gains/ losses in property revaluations.

Residential development PBT for H1’08 of A$34.2 million was down marginally from A$34.3 million for H1’07.

As at June 30, the commercial and industrial business arm had a pre-committed forward workload of 374,000 sq m, down from 424,000 sq m at end-December 2007. Australand attributed the decline to the high level of construction delivered during H1’08.

Australand’s investment property business comprises a portfolio valued at A$2.18 billion of 63 income-producing investment properties and a further 10 investment properties under development.

Australand said fixed rental increases within the portfolio average 3.3 per cent for the next 12 months and the portfolio has a weighted average lease expiry profile of 7 years.

For its residential business arm, Australand said that sales volumes were lower compared with the same period a year ago. However, operating margins remained consistent.

Australand had announced a non-underwritten one-for-one renounceable entitlement offer at 60 Australian cents per stapled security to eligible security-holders and CapitaLand has committed to taking up its full entitlement.

Depending on the remaining level of participation, Australand said the entitlement offer will provide between A$302 million and A$557 million of additional capital that will be used to reduce gearing and fund projects in its development pipeline.

Source: Business Times

CapitaLand said today that it is subscribing to about 54 percent of its Australian unit Australand’s one-for-one rights issue.

It will pay some 302 million Australian dollars, or about 392 million dollars for the purchase.

A majority shareholder of Australand, CapitaLand said its commitment to subscribe for its full entitlement is a clear endorsement of Australand.

It added that Australand is its strategic business, having contributed to consistent growth for 11 consecutive years.

Noting the current weak environment, CapitaLand said the weakness is due largely to the uncertainties in the global financial markets.

It said it is confident of Australand’s future growth potential, adding that proceeds from the rights issue will strengthen Australand’s balance sheet

Australand today reported a 79 percent drop in profits in the first half this year

In a filing with the Singapore Exchange, the Australian group said its net profit in the first half this year was 25.6 million Australian dollars.

Source: 938Live

Australia and Singapore-listed developer Australand Property Group today reported a 79 percent drop in fiscal first half profit.

In a filing with the Singapore Exchange, the Australian group said its net profit in the first half this year was 25.6 million Australian dollars.

It will pay a first half dividend of 8 Australian cents a share, unchanged from the year-ago period.

Australand said the slower growth in net profits was due to a downturn in residential market conditions, particularly in New South Wales state.

It also announced a non-underwritten one-for-one renounceable entitlement offer at 60 Australian cents per security.

The offer is expected to raise between 302 and 557 million Australian dollars of additional capital.

Source: 938Live