Australand Property Prefers U.S. Debt Sales as Terms Beat Those in Asia

Australand Property Group (ALZ) prefers to issue bonds in the U.S., where terms are longer and borrowing is cheaper, than in Asia, where its parent company CapitaLand Ltd. (CAPL), is based.

“Because of our relationship with CapitaLand, Asia is a logical market for us to access financing,” Chief Financial Officer Kieran Pryke said in an interview in Sydney yesterday. “But the pricing and terms weren’t as attractive, so we’ve ended up going to the U.S. instead. We’ll continue to look at that market and nurture our relationships with the investors who participated there.”

Australand, which last year completed documentation allowing it to access Asian debt markets, has so far not sold any bonds in the region, choosing instead to issue A$170 million of guaranteed senior notes in the U.S. private placement market in April. The group doesn’t have a domestic debt rating, which prevents it from selling bonds in Australia.

The Sydney-based company will seek “attractively priced” domestic bank debt that will mature between 2015 and 2020, when it has no other loan expiries, Pryke said. Singapore-based CapitaLand, Southeast Asia’s biggest developer, owns almost 60 percent of Australand.

Australian property groups including Westfield Group (WDC), CFS Retail Property Trust (CFX) and Goodman Group (GMG) have sold more bonds domestically and overseas so far this year since 2003 as their property values have stabilized and they’ve reduced debt following the global financial crisis.

Housing

Australand this week cut its forecast for residential lot sales growth to 20 percent from the 25 percent expected three months ago. The group said net profit rose 17 percent to A$84.8 million from a year ago, boosted by growth in its development division.

“What we’ve seen, particularly in April, May and June, is a very distracted consumer,” said Rod Fehring, executive general manager of Australand’s residential division. “They’re very interested, very responsive to marketing, but are unwilling to commit.”

Australian home prices fell 1.2 percent in the three months to May, real estate researcher RP Data said last month. Consumer confidence plunged by the most since October 2008.

Building approvals dropped in May by the most in four months, which will continue to exacerbate a shortage of housing and keep prices flat, supporting Australand’s growth forecast, Fehring said.

To contact the reporter on this story: Nichola Saminather in Sydney at Nsaminather1@bloomberg.net.

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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