Property malaise hits Westfield

Property malaise hits Westfield
Email Print Normal font Large font Carolyn Cummins
July 13, 2007

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AdvertisementRETAIL investors in Westfield are believed to have had second thoughts on a $450 million capital raising, amid suggestions the underwriters were left with a hefty shortfall.

Goldman Sachs JBWere says the take-up rate on the retail portion of the Westfield deal was a low 30 per cent, with the shortfall largely taken up by sub-underwriters at the original issue price of $19.50.

The shortfall, as well as a general malaise in the listed property trust sector, accounted for a weak sharemarket showing by the trusts yesterday. Recent underperformers Centro Properties and Goodman International continued to come under pressure and did not look like bouncing back in the near term.

About 153 million Westfield securities were offered to the market, of which about 36 million was held over for retail investors.

Final figures for the retail issue will be revealed today or early next week, but at first blush the offering pitched at $19.50 a security was more expensive than a new Westfield security (ex distribution) on the sharemarket.

Westfield's securities closed at $19.99 before yesterday's trading halt. But those securities include the 54.4¢ final distribution. To make the retail issue palatable at the offer price, Westfield should have been trading at $20.05 or higher ($19.50 plus the 54.4¢ distribution).

The underwriters to the retail issue, Credit Suisse and JPMorgan, were last night working the phones to ensure the sub-underwriters, ABN Amro Rothschild, Citibank, Deutsche Bank and Merrill Lynch, could place the stock with their clients.

Westfield announced the $3 billion capital raising on June 12 at $19.50 a security. It was split into an institutional offering, which was completed on June 14, and yesterday's offering.

None of the new securities were entitled to the final distribution of 54.5¢. The new stock will not rank equally with the existing Westfield stock until August, when the final distribution is paid to existing investors.

Since it is a split issue, the institutional securities have been trading since June 14. But with the volatility of the global real estate market, they have traded as low as $19.17, and closed on Wednesday night (before the retail offer) at $19.42, 8¢ lower than the issue.

One fund manager said if a retail investor wanted to buy the new stock, they could have done so at $19.17, and questioned why they would pay $19.50.

The other concern was that once all the new securities are converted to Westfield shares, the price may still be lower given the state of the LPT sector.

Goldman Sachs JBWere said all the LPTs were lower yesterday as investors sold down to pay for the Westfield issue.

But rising bond yields had hit global LPT indices hard in the past month, the broker said.

For June, the ASX 200 Property Index was down 4.66 per cent, the Tokyo Stock Exchange REIT Index was down 6.23 per cent, and the FTSE 350 Real Estate Index was down 4.67 per cent. Thanks to China's economic boom, the Hang Seng property index was up 6.69 per cent and Singapore up 0.35 per cent.