Three property, infrastructure funds allay fears

Two MacarthurCook funds and one Macquarie fund update financial positions

THREE property and infrastructure funds yesterday issued statements in a bid to allay market concerns about tighter credit, and to provide updates on their financial positions.

Facing a possible rating downgrade by Moody’s Investors Service, MacarthurCook Industrial Reit (MI-Reit) reassured investors that it is ‘advanced in negotiations’ to refinance a $220 million facility maturing in April 2009. Discussions should be finalised in January next year.

Moody’s said on Tuesday that MI-Reit, with a Baa3 corporate family rating, ‘faces significant refinancing risks’ as this amount of debt is not covered by available committed facilities.

Moody’s review also reflected concerns over MI-Reit’s asset and tenant concentration, which could be ‘much greater…than is consistent with a Baa3 rating.’

To this, MI-Reit said that its income is protected by a long lease expiry profile. For instance, only 3.6 per cent of the trust’s rental income will be subject to lease expiry in FY2010.

Head lease arrangements and a diversified portfolio of quality tenants also contribute to income security, it added. Around 36 per cent of rental income comes from manufacturing facilities which ‘tend to have higher tenant retention rates in an economic downturn’.

MI-Reit ended trading yesterday with an unchanged unit price of 33 cents.

Another fund, the MacarthurCook Property Securities Fund, also updated investors on its operations yesterday.

‘While interest rates around the world are now trending down, the ability to source competitively priced debt, combined with the anticipated slowing in economic growth, continues to be a concern for the market,’ said Richard Haddock, chairman of fund parent MacarthurCook Fund Management Ltd.

A priority is to further reduce debt and prudently manage its underlying portfolios, said the MacarthurCook Property Securities Fund. One strategy is to cut its weightings on unlisted property and use those funds to reduce debt.

A third fund, the Macquarie International Infrastructure Fund Limited (MIIF), said yesterday that it has no bilateral dealings with known troubled financial institutions.

According to the fund, borrowings held by its underlying businesses have remaining maturities of three to 14 years, and most of its interest exposures are also hedged for the medium to long term.

MIIF also said that its businesses are performing strongly in line with management’s expectations. It therefore expects income this year to be comparable with that received last year.

The unit price for MIIF rose 2.5 cents yesterday to close at 37.5 cents.

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