Macquarie CountryWide Announces Results Six Months to December 2007


* Same store net operating income (NOI) growth of 3.6 per cent
* Global portfolio occupancy of 97.1 per cent
* Distributable earnings of A$97.7 million, up 2.5 per cent from prior corresponding period
* Net tangible assets of A$1.91

The composition of the Trust’s earnings is consistent with previous periods, with the majority derived from underlying operating profit delivered by the Trust’s quality portfolio of 273 properties, located in three main regions – the US (62 per cent)1, Australia/NZ (27 per cent)1 and Europe (11 per cent)1. This portfolio’s assets continue to drive strong earnings due to the quality of the real estate and the application of the Trust’s investment principles of focussing on its niche strategy of globally investing in grocery anchored real estate.

Macquarie CountryWide’s Chief Executive Officer, Mr Steven Sewell, said: “The strong same store NOI growth of 3.6 per cent reflects the resilience of Macquarie CountryWide’s core portfolio and our investment strategy. The geographic and tenant diversity of the Trust’s portfolio reduces the Trust’s exposure to any particular market or tenant. Currently, over 30 per cent of its base rent is derived from some of the world’s top retailers, further reinforcing the quality of its properties. The underlying cash flows from the assets are solid, occupancy rates are very high across all portfolios, rental growth has been achieved and the assets have a long lease profile.”



The Trust achieved same store NOI growth in the US of 3.6 per cent. This was largely driven by improving average occupancy of 96.2 per cent, demonstrating the resilience of the high quality geographic locations and niche asset class the Trust has invested in.

The Australian portfolio achieved same store NOI growth of 3.3 per cent and maintained an occupancy rate of 99.3 per cent, whilst the New Zealand portfolio had zero vacancies and recorded same store NOI growth of 4.0 per cent. This performance was further supported by the continued strong demand in Australia and New Zealand from national brand retailers.

At the same time, rental growth in all markets was driven by non-discretionary retailers seeking to base their business in retail properties that are well managed and anchored by marketing leading retailers.

Macquarie CountryWide continues to build its redevelopment pipeline with the aim to enhance unitholder value. In the six months to 31 December 2007, the Trust completed four redevelopment projects in Australia and one in New Zealand, for a total spend of A$49.2 million at an attractive average year one yield of 8.5 per cent2.

This included the completion of the Trust’s first greenfield development in Renmark, South Australia, in November 2007. A further 11 redevelopment projects are currently underway in Australia and four in the US, in partnership with Regency Centers LLC.



The Trust comprehensively reviewed the valuation of its entire portfolio, including undertaking external valuations on 38 of MCW’s 273 properties, representing AS$740.6 million in assets or approximately 13.5 per cent of the Trust’s total portfolio. Together with internal Director’s valuations the portfolio value marginally decreased by A$39.3 million or 0.7 per cent which implies an overall average increase in capitalisation rates from 6.38 to 6.43 per cent.

“The sound underlying fundamentals of the portfolio were confirmed by these valuations, highlighting the success of Macquarie CountryWide’s core strategy of owning high quality properties anchored by major retailers located in markets with strong demographics,” said Mr Sewell.

Mr Sewell said: “Following the round of external and Directors valuations, the Trust’s capitalisation rates held firm or marginally softened. This was due to the Trust’s solid income growth results driven by a ‘flight to quality’ by retailers seeking to co-locate in the best properties, located in above average markets and anchored by market leading anchor tenants. Net tangible assets have marginally reduced to A$1.91.”


STRATEGICALLY DIVESTING AND RECYCLING CAPITAL Strategically divesting andS recycling capital

In conjunction with Regency, Macquarie CountryWide implemented a strategic disposal program of 15 mature assets in the US. This was undertaken in two stages. Stage one saw the ‘South East Portfolio’ of eight US properties sold for a gross sale price of US$104.0 million at an average capitalisation rate of 6.8 per cent – a deal which was completed in November 2007. Stage two focused on a portfolio of seven properties (the ‘Mid Atlantic Portfolio’) which was contracted for a gross sale price of US$118.6 million, and is scheduled to close in March 2008.

In each instance, the sale price was in line with book value and management has utilised these funds to reduce gearing in the US venture, rather than reinvesting in current markets.



Macquarie CountryWide’s debt has been sourced from a diverse group of lenders in three continents, with a weighted average term to maturity of 3.4 years3. Following repayment of the bridge facility, no debt facilities are due to expire in the current financial year and a minimal amount is due to expire in FY09.

The Trust’s debt facilities are simply structured, with the majority of property level mortgage backed debt sourced offshore in the United States and Europe and two head trust debt facilities. The current facilities provide the Trust with further debt capacity of A$118.9 million to fund its near term capital expenditure requirements such as redevelopment commitments.

Mr Sewell highlighted: “We are selectively looking at further opportunistic asset sales to lower the Trust’s gearing and strengthen Macquarie CountryWide’s balance sheet.”

Trust management also actively engages in foreign exchange hedging within the Board’s approved hedging levels, to provide a greater level of income security for investors, particularly with the current strength of the Australian dollar.

Macquarie CountryWide presently has 100 per cent of its offshore future US dollar income hedged back to Australian dollars for five years at a very attractive average hedge rate of US$0.73.



Macquarie CountryWide’s results for this period reinforce the resilience of the Trust’s active asset management strategy, with successful redevelopments and leasing activity underpinning the organic growth in net operating income. The Trust remains committed to repositioning its portfolio with a view to delivering optimal, consistent long term growth. The Trust is cautious of any slowdown in the US economy; however the management team are committed and motivated to enhancing unit holder value.

On a static portfolio basis and barring unforeseen occupancy loss, earnings and distributions for the financial year to 30 June 2008 are estimated to be at least 15.0 cents per unit.

“Macquarie CountryWide’s globally diverse portfolio, coupled with Regency Center’s expert asset management capabilities has enabled the Trust to establish itself as a leader in its niche retail real estate sector,” Mr Sewell said.

Macquarie CountryWide Trust is a fully integrated listed property trust investing in retail properties with assets under management of A$5.5 billion.  Circa A$28 billion of real estate assets are managed globally by Macquarie Real Estate and its associates, across a portfolio of listed and unlisted property trusts, unlisted development funds and property investment syndicates. Macquarie’s real estate investment management expertise has been recognised internationally, voted No. 1 in Investment Management in Asia, Australia, China, Hong Kong, Singapore and the US in the 2007 Euromoney Liquid Real Estate Awards.

Regency is a leading national owner, operator, and developer focused on grocery-anchored and community retail centres.  As of 31 December 2007, the company owned 451 retail properties, including those held in joint ventures, totalling 59 million square feet located in high growth markets throughout the US.  Operating as a fully integrated real estate company, Regency is a qualified real estate investment trust.


1 By book value
2 Weighted by project value, 50 per cent levered
3 Based on terms agreed for extension of the multi currency facility to February 2011 and repayment of A$50 million bridge facility

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Marc Pallisco

A former property analyst and print journalist, Marc is the publisher of