- October 3, 2012
The Auzzie’s properties
Australian real estate companies have had some of the best performing CDS in the industry this year. From Bloomberg,
Credit-default swaps on GPT Group (GPT), Westfield Group (WDC) and Lend Lease Group (LLC) tumbled the most among companies in the Markit iTraxx Australia gauge in 2012, according to data provider CMA. The declines all outpaced the 78 basis-point drop on an index of contracts on global real estate companies, the data show. GPT is boosting retail rents 4.5 percent this year and has an occupancy rate of 99.1 percent, while Westfield and Lend Lease have signed deals with pension funds to jointly fund projects…….
Australian property trusts sold off assets from Europe to the U.S. after a global buying spree before the 2008 credit freeze saddled them with billions in losses on overseas investments. The S&P/ASX 200 Real Estate Index (AS51REAL) has surged 19 percent this year, more than double the benchmark gauge’s 8 percent gain, as investors bet that the fastest forecast economic growth among the Group of 10 will support property values and lease payments…….
The average price of credit-default swaps for four of the nation’s biggest property companies — GPT, Westfield, Lend Lease and CFS Retail (CFX) Property Trust — fell 110 basis points this year to 203 basis points on Sept. 28 and reached a 13-month low on Sept. 17, the CMA data show…….
Sydney-based GPT, which reported a 13 percent increase in net income to A$275.5 million ($285.6 million) in the six months ended June 30, expects rent growth to help drive an earnings increase of at least 7 percent in the year ending Dec. 31, it said in August.
Australia’s second-biggest diversified property trust expects rental growth of between 3.4 percent and 4.5 percent across its properties in 2012 and a decline in debt costs to 5.7 percent, the company said…….
“GPT’s balance sheet is very strong with debt-to-total assets at 20 percent and interest coverage of 4.7 times as at the end of June,” said Michael O’Brien, the company’s chief financial officer who from this week will head up GPT’s new business area of corporate development. “It’s great to see the company’s strong position demonstrated through the competitiveness of pricing of debt we’ve accessed.”……
The cost of insuring GPT’s debt dropped 244 basis points to 156 as of Sept. 28 from a high of 400 on Oct. 4 last year, CMA prices show. Westfield default swaps declined to 168 from a peak of 388 the same month, and Lend Lease’s fell 195 basis points to 343. CFS Retail contracts slid 158 basis points to 146 from a peak on Nov. 25.
The average cost of credit-default swaps on the four companies peaked at 909 basis points in April 2009 amid the financial crisis sparked by the U.S. subprime mortgage collapse, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
Australians spent twice as much as Middle Eastern investors on U.S. real estate from 2005 to mid-2007, and almost three times more than Germans, according to New York-based Real Capital Analytics Inc., a provider of data on the U.S. property market. That backfired when property values tumbled and borrowing costs spiked because of the credit crunch, forcing companies to write down and sell offshore assets and replenish balance sheets ravaged by losses…….
The Markit iTraxx Australia index was at 160 basis points. The gauge of corporate bond risk reached a six-month low of 135 on Sept. 14, CMA data show. The gauge is a benchmark for insuring bonds against default and traders use it to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite…….
Westfield sold $500 million of 2022 notes on Sept. 24, paying a spread of 180 basis points more than Treasuries, according to data compiled by Bloomberg. The Sydney-based company paid a 350 basis-point spread on 10-year debt in 2009, the data show.
The extra yield that Westfield’s $1 billion of 4.625 percent notes due in 2021 offer over U.S. swap rates shrank to a low of 181 basis points on Sept. 27 from as high as 249 in June, Royal Bank of Scotland Plc prices show.
Westfield this year sold stakes in 12 U.S. malls to the Canada Pension Plan Investment Board to raise $2.1 billion to fund development projects. It jointly owns Australian and New Zealand malls with Westfield Retail Trust (WRT), and is partnering with local groups in Brazil and Italy to develop new shopping centers.