macquarie at odds on assets

From the Sydney Morning Herald:
(this story is about MCW and MOF )

Macquarie at odds on assets


* Stuart Washington
* June 11, 2008
*

DIRECTORS of Macquarie Countrywide and Macquarie Office Trust say their asset valuations are robust and they have not made substantial writedowns on their portfolios of real estate assets.

As managers of the funds, the directors have maintained their valuations, even as the market continues to hammer listed real estate investment trusts.

The result is the two funds have reported property valuations - or net asset values - far higher than their unit prices in their most recent results.

In the case of Macquarie Countrywide, the directors' valuation of net assets is $1.91 a unit, or 72 per cent above its market price yesterday of $1.11.

And Macquarie Office Trust's valuation of net assets is $1.71, or 77 per cent above its market price of 96.5c yesterday.

But from another perspective, as an investor in the funds, Macquarie Group at its annual result last month wrote down its stakes in both REITS to market value as at March 31.

This translated to $1.17 a unit for Macquarie Countrywide and 99c for Macquarie Office Trust.

Macquarie Group's directors made the writedowns after judging the investments "impaired", which is a test that, among other things, acknowledges a structural change affecting its investment.

At Macquarie Group's annual results briefing, its chief executive, Nicholas Moore, highlighted the uncertainty about the value of physical property within REITS as investors came to terms with the credit crunch.

"We have seen the value of the listed REITS fall but we really haven't seen a lot of evidence as to what's happening to the physical property standing behind that," Mr Moore said. On its real estate business, Macquarie said: "Asset price reductions [are] likely in most markets".

Macquarie Group's starkly different views on the value of the funds - as an investor and a manager - highlight an industry-wide disparity between what investors see as the market value of REITs and what most REIT directors are valuing their holdings at.

And if real-world asset prices fall markedly, the broader industry faces large writedowns as pre-crisis directors' valuations are brought into line with market values.