Macquarie sells Aussie REIT for a A$300 million gain

In an overnight placement, Macquarie Bank sells its 7.7% stake in Macquarie Goodman Group. No change to its Asian operations, says the bank.
In an ongoing effort to recycle capital, Macquarie Bank has offloaded its 7.7% stake in the Macquarie Goodman real estate trust via an overnight placement to shareholders.

Macquarie sold 124 million shares in the largest industrial property group on the ASX at a price of A$5.90 per security, netting A$733 million in proceeds and a pre-profit share gain of about A$300 million.

The bank acted as sole lead manager on the transaction, selling about half of the shares to founder and CEO Greg Goodman and three other cornerstone investors, and the other 50% to other institutions on the open market.

The sale is a timely exit for Macquarie Bank that has been realising gains from its assets in order to make new higher-growth investments.

Greg Ward, the bankÆs chief financial officer, says about A$100 million of the proceeds will be re-invested in its 50:50 fund management joint venture in Asia, Macquarie Goodman Asia. The money will go towards new acquisitions and the warehousing of existing assets.

Macquarie Goodman Asia runs a HK$5.1 billion unlisted property fund in Hong Kong.

ôThe sell-down does not change our view on Macquarie GoodmanÆs fundamentals and growth potential and we expect to continue a strong and cooperative relationship with the group,ö says Ward. ôHowever, it is important for the bank to focus its capital on initiatives where it has appropriate brand and management leverage.ö

Macquarie Goodman (MGQ) was an obvious choice as a sale candidate, having returned 55% in share price performance last year, says Peter Cashmore an analyst with Citigroup in Sydney.

ôThis is probably the number one stock in the REIT sector, and Macquarie had the stock valued on its books at around A$3.18 so the price tag of A$5.90 per security was attractive,ö says Cashmore.

ôMacquarie GoodmanÆs last full-year dividend was 27.5 cents which is equal to about A$34 million dollars for Macquarie. WeÆre predicting an EPS growth of 6% for MGQ next year so Macquarie is walking away from a turbo charged trust. But, having said that, valuations in the sector are extremely high at the moment. MGQ was trading at A$6.39 late yesterday and no analyst has a valuation anywhere near that on the stock.ö

Macquarie BankÆs share price traded up slightly following the sale announcement on Thursday, rising 44 cents to A$62.95. The S&P/ASX200 index itself was down 1.8% on the day.

MacquarieÆs share price has suffered in recent months, falling from highs of around A$71 per share in April to as low as A$59 earlier in August, as investors remain cautious about the bankÆs ability to execute its strategy of offloading risky seed assets, such as its Taiwanese Broadband Communications business.

ôMacquarie really needs to turn these assets over into specialist funds and prove that the model is still working before its share price will improve,ö says Brian Johnson, JPMorganÆs banking analyst in Sydney.

Johnson says the reason behind the sale is an issue of branding. ôA 7% stake in Macquarie Goodman wasnÆt strategic enough when Macquarie has 100% owned vehicles with similar expansion aspirations. Goodman and Macquarie both have aspirations in the US and Europe and it doesnÆt make sense for them to compete against each other for the same assets.ö

He says the A$100 million set aside for Macquarie Goodman in Asia is small when compared to the bankÆs size and its cash reserves. ôMacquarie currently has A$4 billion in shareholder funds and $150 billion in funds under management, so A$100 million for MCA is insignificant. The total cash box held by the bank after the recent sale of assets is now about A$990 million and we expect this to swell to A$1.5 billion over the next six months.ö

Macquarie Bank has been a shareholder in Macquarie Goodman since 2000 when Macquarie Industrial Trust merged with Goodman Hardie Industrial Trust. David Clarke, the chairman of Macquarie Bank and Macquarie Goodman, will stay on the board of the trust in a personal capacity and will seek re-election as a director in November.
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