Ferret's Stock to Watch: MACQUARIE COUNTRYWIDE TRUST 07:32, Friday, 18 February 2005
PROPERTY COMPANY SIGNS A TRUST-TRANSFORMING TRANSACTION
Sydney - Friday - February 18: (RWE) **************************************
OVERVIEW ********
Macquarie CountryWide Trust is reportedly now the biggest owner of convenience shopping centres in the US.
It has eclipsed the Westfield group in a huge buying splurge worth $3.6 billion right across the United States.
It has a joint venture partner called Regency Centers.
Chief executive Kylie Rampa has called the deal a trust-transforming transaction.
It has certainly launched MCW into the real big time as a property shopping centre leader.
MCW will fund its share of the of the purchase through debt and an $706 million equity raising.
It will be on the basis of 6-for 11 renouncea le rights issue and a book build placement to raise $137 milion.
The rights will be valued at $1.85 eeach on a distribution yield of 6.4 per cent.
Macqurie CountryWide is buying 65 per cent of First Washington's US shopping centre portfolio.
The joint venture partners are buying a portfolio of of 101 neighbourhood shopping centres spread throughout California,Washington DC, Baltimore and Chicago.
Completion of the huge deal will see Macquarie CountryWide Trust dominating grocery centred operations in the US, New Zealand and Australia.
Earlier this month it was touch and go whether the deal would go through with other parties closing in but Washington /CalPERS preferred the joint venturers.
Although the purchase has drawn some criticism as to its cost, Ms Rampa suggests the price paid for the asset reflected the high quality of the portfolio.
UNIT PRICE MOVEMENTS --------------------
Units of Macquarie CountryWide have been suspended for much of this week while the Trust does a book building. The last sale was at $2.12. Rolling high for the year has been $2.19 and low $1.69. Dividend was 14.3 cent a unit for the 12 months to June 30 last. The Trust's market capitalisation is now $2.4 billion. The First Washington deal is expected to boost earnings by 5.7 per cent to 15.45c a share in the first year to June 30, 2006.
MCW already has a strong portfolio of 144 retail sites in regional Australia (80), NZ (20) and in the US (17, via 75% of a JV with Regency).
The manager is aggressive, and has a target of increasing the asset base progressively via acquisitions in Aust, USA and NZ.
Exposure is to general and grocery retail with major retail anchors at each site.
Anchor tenants in Australia are: Coles (36 stores) WOW (28), Independents (3) and Progressive (12).
MCW represents a low risk investment, with strong growth strategies, including an increasing US portfolio.
There are low barriers to entry for competitor supermarket stores.
Overseas exposures are hedged - expected profit stream is hedged 100 per cent for next 5 years.
US portfolio is via a 75 per cent JV with Regency - a major US grocery retail site owner.
The December half revenue was up 26 per cent to $104 million, profit climbed 36 per cent to $77.8 million showing earnings up 11 per cent to 14 cents per unit.
Dividend increased 4.5 per cent to 14.3 cpu.
Just prior to the latest $3.6 billion joint venture in the US, Shaw Stockbroking went on record as saying MCW continued aggressive acquisition strategy.
MCW paid performance fees from reserves and contributed equity, and was deducted from reported profits.
Development pipeline remains strong.
NPAT by region was Aust $55M, NZ $3M, US $21M.
Tenant revenue increased by 4 per cent in Australia and 1.5 per cent in NZ.
Renewed leases increased by 6.3 per cent in Aust, and occupancy cost is low (opportunity).
MCW has acquired 26 US malls post balance date - but yield is only 7.4% which provides limited upside without refocussing or redevelopment.
BACKGROUND **********
Macquarie CountryWide Trust is managed by the Macquarie Bank's property investment division but is not liable in any way to Trust members.
It was formerly known as CountryWide Retail.
The Trust now has shopping centres spread out around Australia, New Zealand and the US.
It has a major stake in 148 properties in Austtralia and New Zealand.
Macquarie CountryWide joined the US market in July 2001 when it joined up with Regency Centres in 2001.
In the joint venture the Trust now has a 75 per cent stake in 50 properties across North America.
Up till the latest deal the portfolio had a total gross lettable area of 719,644 sqm., an occupancy rate of 99% and an average anchor tenant lease expiry of 12.5 years.
At December 2003, MCW holds 97 properties across Australia and New Zealand, valued at $837.69m, which represents 68.1 per cent of the total property assets.
Seventy five per cent of net income came from the Australia/New Zealand region being derived from anchor tenants Coles and Woolworths in Australia and Progressive in New Zealand.
During the same period, MCW held 27 properties in the USA valued at $322.31m, which represents 31.9% of total assets.
In the US, 74 per cent of net rental income was derived from anchor tenants; credit rated national tenants and major national specialty tenants including Kroger, Publix, Albertsons and Ahold (Bi-Lo).
