MacarthurCook looks to reduce exposure to unlisted property

MacarthurCook is changing tack in its property securities fund, making a shift from unlisted property towards the listed variety.

The manager is currently looking to reduce its debt levels using capital derived from realising investments in unlisted property trusts and syndicates. This will also have the effect of reducing the fund’s weighting to unlisted property vehicles, and increase the weighting to domestic and offshore real estate investment trusts (REITs).

The manager said in the current environment, listed property trusts “offer more attractive long-term prospects and better relative value than some unlisted property funds”.

But the group said that while the Australian REIT sector shows good long-term value, in the short term, “negative sentiment, volatility and a scarcity of capital continue to work against the sector”.

Furthermore, “the continuation of tight lending conditions and the impact of depreciating valuations will continue to remain key challenges in 2009”.

The recovery in REIT prices would follow an easing of credit supply, the manager said, “particularly in the context that the market is essentially pricing in no chance of REITs being able to successfully roll-over their debt maturities”.

MacarthurCook is now in discussions with the fund’s banker regarding the extension of its debt facility, which expires on May 15 this year.

The fund’s borrowings have been reduced to $44.5 million over recent months. The manager recently reduced its debt levels by $1 million following the redemption of investments in the MacarthurCook Office Property Trust and the MacarthurCook Asian Real Estate Securities Fund.

The group is delaying a decision on the fund distribution for the March quarter 2009 until discussions with bankers are concluded.