CONCERNS over effective rents and continuing illiquidity in the property sector have pounded ING Office Fund's real estate portfolio.
In the half year to June 30, the fund revalued 29 assets resulting in a decrease of 12.4% or $454 million compared with December 2008 valuations. As a result of the valuations, the weighted average capitalisation rate of the portfolio has softened 50 basis points from 6.8% at December 2008 to 7.3% at June 2009.
In Australia, the value of assets decreased 13.9% from $1.99 billion to $1.71 billion. The average capitalisation rate increased approximately 80 basis points to 8.0%.
The worst performing assets were Wellington Central in Perth which fell 28.6% from $80 million to $60 million; followed by 10 – 20 Bond St Sydney which decreased by 20% from $136.3 to $109 million and 140 Creek St Brisbane which slipped 19.5% from $200 million to $161 million.
The United States assets recorded a decrease of 17.4% from $US631.5 million to $US521.5 million. The average capitalisation rate increased approximately 50 basis points to 7.4%.
Meanwhile European investments decreased by 4.5% from €507.6 million to €484.7 million. The average capitalisation rate increased approximately 20 basis points to 6.0%.
IOF’s CEO Tino Tanfara said valuation figures during the period have been characterised by limited transactional evidence, concerns over effective rents and continuing illiquidity in debt markets.
“As such, independent and internal valuations have continued to be adjusted downwards to reflect uncertainty in commercial real estate values, resulting in increased capitalisation rates and discount rates across all markets,” he concluded.
But Tinfara said the fund has significant capacity to withstand any further valuation pressure.
“Additionally, the fund has surplus liquidity to meet all its debt expiries through to June 2012,” he concluded.
Proforma gearing was approximately 26%.
Australian Property Journal
