Macquarie Office Buys Time With Debt Extension
Sydney Morning Herald
Tuesday December 30, 2008
MACQUARIE OFFICE TRUST has secured a brief extension on its $US74.5 million ($108 million) loan for an office block in the United States while it tries to improve its cash position by selling property and raising new capital before debts of $1.4 billion fall due next year.
Like most Australian listed property trusts (LPTs), the Macquarie fund was battered this year as cheap credit evaporated, loans became harder to refinance and investors shied away from companies that appeared to have too much debt. Shares in Macquarie Office Trust, which owns half of Macquarie Group's headquarters in Martin Place, are down 75.7 per cent for the year - from a peak of $1.41 in January to 29c by the close of trading yesterday. In an effort to keep its investors happy, the trust announced on December 12 about $800 million of "capital management initiatives" to improve cash flow, including: the sale of its interest in the Wachovia Financial Centre in Miami for $279 million; the cancellation of its December quarter dividend and a cut in the dividend ratio for next year to save $82 million; and an entitlement offer and placement to raise $508 million. In a statement, the trust said all its debt maturities next year had been either extended or would be repaid with available liquidity, and the next debt expiry would not occur until June 2010. Despite diluting the value for shareholders and concerns that the debt problem had been delayed rather than solved, the moves were seen as necessary for the survival of the trust, and shares rallied 70 per cent from their low base on the news. But shares fell 12.12 per cent yesterday with the announcement that the trust had found a new lender willing to extend a $US74.5 million loan for the One and Three Christina Centre in Wilmington, Philadelphia, until March 1. The news seemed at odds with the earlier claim that all debt positions had been resolved until 2010. But Macquarie Office Trust executives were unavailable for comment. The Christina Centre was valued in July at $US143.5 million, putting the debt-to-equity ratio on it at 52 per cent. The trust said in a statement it hoped the capital management initiatives would take the level of gearing in the fund from 45.8 per cent tol 37.5 per cent. Macquarie Office Trust is known for investing in high-grade properties with strong revenue streams from reliable tenants. Yesterday it also announced it had renewed a 12-year lease in the Wells Fargo Centre in Denver.
© 2008 Sydney Morning Herald
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