Would Australand have collapsed without Sing Inc?
February 2, 2010
Dear Mayne Reporters,
whilst the media is focusing on ANZ's profit warning today, the bigger shock was this emergency $557 million capital raising by property developer Australand, which is majority owned by the Singapore Government.
Australand began the day with a market capitalisation of $905 million and claimed net tangible assets of $1.66 per share, despite the stock having tumbled from a December 2007 peak of $2.60 to Friday's close of just 98c.
Lo and behold, today we get a one for one rights issue priced at just 60c, with Sing Inc only promising to step in for their share of $302 million, whilst the remaining $255 million could fail if the stock tanks when trading resumes.
If Singapore Inc wasn't standing behind Australand, you have to wonder if the company would have even survived because for shock value today's announcement is very similar to the surprising $500 million capital raising that then MFS CEO Michael King unveiled on Friday, January 18, 2008, before he resigned the following Monday.
Australand's chairman made the following statement at the April 17 AGM:
"Our balance sheet and the facilities we have in place are well supported by quality assets and strong operating cash flows from the business."
New CEO Bob Johnston also gave no hint of the coming drama, reassuring shareholders that gearing was only 40.4%, net profit came in at $269 million in 2007 and distributions were a most impressive 17c a share.
The collapsing listed property trust sector has turned up some extraordinary developments, but if even the Singapore Government's vehicle is in trouble with total debts of $1.5 billion, things must be really crook.
Australand has singled out NSW as the worst performing residential market, started the process of major write downs, will no longer pay out development profits and has signalled a significant cut in distributions.
GPT is starting to look better by the day now that Mirvac and Australand have quickly followed their lead, so now we're only waiting on Westfield and Stockland to make a downgrade.
Mirvac CEO Greg Paramor bowed out today, a few months earlier than planned, so it will be interesting to see if any other leaders in the crisis ridden commercial property sector will take their leave.
The Singapore Inc experience in Australia of late has been terrible. It laid out $8.14 billion in cash for the Alinta east coast assets last August and then failed to flip it into SP Ausnet. This has left Singapore Power lumbered with $17 billion in debt and the same power assets are today probably worth about $6 billion.
Singapore Inc also ploughed $400 million into ABC Learning at $7.30 a share 12 months ago and has watched almost 90% of that evaporate.
Similarly, the decision to take a one third interest in the Myer Melbourne property play at a valuation of $600 million now looks ridiculous, as does the $717.5 million purchase of a half share in Westfield Parramatta in April 2007 on a skinny yield of about 5%.
Whilst Frank Lowy is going through hell with this tax haven scandal, he still looks incredibly smart for his dealings in the first eights months of last year. Remember that $3 billion rights issue last June at $19.50. And what about flogging 50% of our local shopping centre at Doncaster to La Salle for a stunning $738 million on a yield of just 4.7%.
Amazingly, Fairfax reported today that La Salle is being mentioned as the likely buyer of four of Centro's bigger Australian shopping centres, which are on the books at $1.16 billion and will therefore probably sell for about $1 billion.
Flogging prize assets offshore will increasingly be the story of the over-geared Australian commercial property sector because most of the big listed players are seemingly in crisis courtesy of carrying too much debt.
That $1.2 trillion of Australian super should be coming into play right now but most of our super trustees are so risk averse they are instead accumulating huge piles of cash. This partly explains why it was the RACV that was able to pick up the trophy Royal Pines resort on the Gold Coast from Morgan Stanley last week for what looks like a great price.
Finally, I'll be chatting to 4BC Drive presenter Mike Smith just after 4pm about the ANZ and NAB write-downs and you can listen to the stream here or download it from 4.30pm off our home page.
The ABC radio chats tomorrow at 9.15pm in Sydney and 5.40pm in Melbourrne will no doubt be dominated by these banking write-downs as well.
That's all for now.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.
whilst the media is focusing on ANZ's profit warning today, the bigger shock was this emergency $557 million capital raising by property developer Australand, which is majority owned by the Singapore Government.
Australand began the day with a market capitalisation of $905 million and claimed net tangible assets of $1.66 per share, despite the stock having tumbled from a December 2007 peak of $2.60 to Friday's close of just 98c.
Lo and behold, today we get a one for one rights issue priced at just 60c, with Sing Inc only promising to step in for their share of $302 million, whilst the remaining $255 million could fail if the stock tanks when trading resumes.
If Singapore Inc wasn't standing behind Australand, you have to wonder if the company would have even survived because for shock value today's announcement is very similar to the surprising $500 million capital raising that then MFS CEO Michael King unveiled on Friday, January 18, 2008, before he resigned the following Monday.
Australand's chairman made the following statement at the April 17 AGM:
"Our balance sheet and the facilities we have in place are well supported by quality assets and strong operating cash flows from the business."
New CEO Bob Johnston also gave no hint of the coming drama, reassuring shareholders that gearing was only 40.4%, net profit came in at $269 million in 2007 and distributions were a most impressive 17c a share.
The collapsing listed property trust sector has turned up some extraordinary developments, but if even the Singapore Government's vehicle is in trouble with total debts of $1.5 billion, things must be really crook.
Australand has singled out NSW as the worst performing residential market, started the process of major write downs, will no longer pay out development profits and has signalled a significant cut in distributions.
GPT is starting to look better by the day now that Mirvac and Australand have quickly followed their lead, so now we're only waiting on Westfield and Stockland to make a downgrade.
Mirvac CEO Greg Paramor bowed out today, a few months earlier than planned, so it will be interesting to see if any other leaders in the crisis ridden commercial property sector will take their leave.
The Singapore Inc experience in Australia of late has been terrible. It laid out $8.14 billion in cash for the Alinta east coast assets last August and then failed to flip it into SP Ausnet. This has left Singapore Power lumbered with $17 billion in debt and the same power assets are today probably worth about $6 billion.
Singapore Inc also ploughed $400 million into ABC Learning at $7.30 a share 12 months ago and has watched almost 90% of that evaporate.
Similarly, the decision to take a one third interest in the Myer Melbourne property play at a valuation of $600 million now looks ridiculous, as does the $717.5 million purchase of a half share in Westfield Parramatta in April 2007 on a skinny yield of about 5%.
Whilst Frank Lowy is going through hell with this tax haven scandal, he still looks incredibly smart for his dealings in the first eights months of last year. Remember that $3 billion rights issue last June at $19.50. And what about flogging 50% of our local shopping centre at Doncaster to La Salle for a stunning $738 million on a yield of just 4.7%.
Amazingly, Fairfax reported today that La Salle is being mentioned as the likely buyer of four of Centro's bigger Australian shopping centres, which are on the books at $1.16 billion and will therefore probably sell for about $1 billion.
Flogging prize assets offshore will increasingly be the story of the over-geared Australian commercial property sector because most of the big listed players are seemingly in crisis courtesy of carrying too much debt.
That $1.2 trillion of Australian super should be coming into play right now but most of our super trustees are so risk averse they are instead accumulating huge piles of cash. This partly explains why it was the RACV that was able to pick up the trophy Royal Pines resort on the Gold Coast from Morgan Stanley last week for what looks like a great price.
Finally, I'll be chatting to 4BC Drive presenter Mike Smith just after 4pm about the ANZ and NAB write-downs and you can listen to the stream here or download it from 4.30pm off our home page.
The ABC radio chats tomorrow at 9.15pm in Sydney and 5.40pm in Melbourrne will no doubt be dominated by these banking write-downs as well.
That's all for now.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.