lpt sector plunges to a 20-year low

how low can it go?

Listed property sector plunges to a 20-year lowFont Size: Decrease Increase Print Page: Print Florence Chong | February 05, 2009
Article from: The Australian
THE listed property sector yesterday plunged to its lowest level in more than two decades -- the price of a $2.9 billion Westfield capital raising.

Westfield's own securities also dropped 12.4 per cent, from $12.10 before it went into trading halt on Tuesday, to close at $10.60 -- just 10c above the placement issue price of $10.50. And, because of the weighting of Westfield in the sector's benchmark index, the S&P/ASX 200 REITs dropped to 710 points, wiping out hundreds of millions of dollars in value.

An investment banker who was one of the four underwriters for the Westfield placement pointed to "a bad night on Wall Street" in which US REITs and financial stocks had "dropped substantially".

He said the Australian market had come off in response to the US fall.

A fund manager commented: "Usually, the stocks of large trusts like Stockland and Mirvac suffer after a major capital raising in the sector."

He said institutional investors needed to sell other stocks to pay for their allocation in the Westfield placement.

Underwriters said the Westfield placement was oversubscribed, but they would not disclose by how much.

One source said: "We had to scale back some allocations, even including from our existing investors."

This source said a wide range of investors had participated and that there was "strong demand from offshore investors".

Westfield joint managing director Peter Lowy said on Tuesday that proceeds would be used to retire debt, and this would lower the company's gearing ratio by 4 per cent, to 36 per cent.

Mr Lowy said the placement was to strengthen the group's balance sheet and position it for potential acquisitions that might arise.

He also said that as the result of the placement the group was revising downwards its earnings forecast to 94-97c per security from last week's forecast of 97-100c, after a $3 billion asset write-down.