Property players hold back

Companies wary of acquisitions amid market uncertainty

EVEN as property prices come off their peaks, sector participants are keeping cautious, with Macquarie MEAG Prime Reit’s manager becoming the latest to say it will hold off making acquisitions for now.

The uncertain mood brought on by turbulence and volatility in financial markets is curbing enthusiasm for property around the world.

“We have been shy of making acquisitions at the wrong price. So far, we have been prudent in terms of looking at what’s a good buy for us,” said Mr Franklin Heng, chief executive officer of Macquarie Pacific Star, the manager of the Macquarie MEAG Prime Reit. The Reit has interests in properties such as Wisma Atria and Ngee Ann City.

He announced at a briefing that for the three months ended Dec 31, the Reit had a distributable net income of $16.2 million, which means a distribution per unit of 1.68 cents.

On Tuesday, Keppel Land CEO Kevin Wong said he will “selectively acquire commercial and residential sites”, while Mapletree Logistics trust said last week it “will continue with its yield plus growth strategy, but in the current environment, it will focus on optimising yield from its existing portfolio”.

This strategy to look to organic growth to drive earnings contrasts with that of last year, when property trusts derived a large part of their profits from acquisitions.

“Most Reits still have balance sheets to take on acquisitions. But for major acquisitions, perhaps not this year, especially if that requires equity fund-raising,” said Mr David Lum, an analyst from Daiwa Securities. “I don’t think any Reit wants to be forced into any equity fund raising.”

“We are starting to see some sellers coming out of the sub-prime crisis. They may have to sell their assets very quickly, particularly those who are heavily-geared. So, getting financing is very challenging now,” said Mr Heng.

Macquarie’s “balance sheet is very healthy, so, it’s much easier for us to gear up, to make those acquisitions. Especially towards the second half of this year, there should be some quality assets from Singapore, Japan and Hong Kong up for sale”.

Source : Today – 31 Jan 2008

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