No big brother to look after Reed
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| The collapse of global investment bank Lehman Brothers has put the future of local unlisted fund, the $202 million Reed Property Trust, in doubt. Lehman is the second largest shareholder in the Reed Property Group, holding a 40% stake in the parent entity of the trust. | |
Adviser Edge’s head of property search Louis Christopher said the failure of Lehman has removed an important source of financial strength from the responsible entity and the trust.
Lehman had previously provided the trust with a revolving credit facility of up to $150 million for bridging finance purposes, including the maintenance of debt covenants.
The trust’s primary source of debt finance is a facility with National Australia Bank. As at August 2008, the trust had a loan valuation ratio of 69%, however, the debt covenant requires the trust to reduce its LVR to 65%.
Adviser Edge has placed its three-star rating on the Reed Property Trust on hold.
“The loss of the Lehman facility undermines the trust’s flexibility in achieving this target and makes it more vulnerable to a softening in cap rates or a slowdown in investor inflows.
“Further, due to limited access to financial information regarding the Reed Property Group during the review process, Adviser Edge was unable to issue an opinion regarding its financial condition or the extent of financial support that it could provide to the trust,” he added.
Reed Property Trust is an unlisted open ended trust investing in a diversified property portfolio, with approximately $202 million of funds under management.
The trust owns the Central One building in Townsville CBD; Chancellor Village Business Centre Sippy Downs, Queensland; Canberra Eye Hospital Symonston, ACT; Telstra House Dickson, ACT; APN Toowoomba print facility at Wilsonton and Yandina, QLD; a BlueScope industrial facility in Coolum, QLD; the Silver @ The Exchange office building on the Gold Coast; and the Chancellor Homemaker Centre and Chancellor Convenience Centre Sippy Downs.
Christopher is taking this precautionary view in response to the loss of financial strength from the downfall of Lehman.
“This action does not necessarily mean that the trust will be downgraded. However, it is viewed as a necessary step to ensure that investors are kept informed,” he concluded.
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