A-REITs have sold $12 billion worth of assets since the beginning of 2011

No equity capital has been raised by A-REITs since March 2011. This is in stark contrast with 2009-10, when almost $17 billion of equity was raised to restore balance sheets. As new equity was issued at a significant discount to net tangible assets (NTA) and not offered as rights issues, this equity was dilutive for existing unit holders. 

For the past year, share buy backs have been a common capital management strategy among A-REITs. Conducting a share buy back when shares are priced at a discount is an effective way to increase NTA. 

In order to fund these buy backs, most A-REITs have undertaken asset sales. This has amounted to $1.1 billion of domestic asset sales and $12 billion of offshore asset sales since the beginning of 2011. Among those conducting the asset sales programs have been: 

• Westfield Group, which has sold $1.2 billion of non-core assets in the United States. It proposes to buy back up to $1.9 billion of shares of issue, although has conducted only 0.3% of this target to date;
• Dexus, which will use part of the proceeds of the sale of a $750 million portfolio of US industrial assets to fund its $200 million buy back;
• Stockland has sold $972 million of office and industrial assets this financial year in pursuit of its residential, retail and retirement asset strategy. A portion of the proceeds are being directed to an on-going buy back programme of approximately $675 million;
• GPT which is selling its Homemaker assets for a reported $195 to extend its buy back from 5% to 10% for approximately $550 million. 

Other assets up for sale include GPT’s share in Sydney’s MLC Centre with a value of approximately $750 million; a 50% share in three of Centro Retail Australia’s prime assets worth approximately $665 million and Investa’s interest in its $200 million office asset at 231 Elizabeth Street, Sydney. 

Australian assets worth approximately $3.7 billion are reported to currently be on the market for sale by A-REITs.

Mark Wist is senior asset consultant at Atchison Consultants.