CFS announces $200m capital raising

Property analysts said the amount could be higher depending on demand for the issue.

Like the $300 million raising by property trust Stockland Group on Tuesday, CFS will defy financial turmoil and take advantage of any cashed-up Australian and overseas institutional investors willing to top up their exposure to the volatile real estate investment trust sector.

The trigger for the raisings, the first of any significance in the sector since the start of this year, was Tuesday's surprise 100 basis point in official interest rates to 6 per cent.

CFS, which is the third-largest listed REIT by market value, is the owner of the country's largest shopping centre, by sales turnover, in Chadstone, Melbourne. It also owns the Myer store in Bourke Street Mall in Melbourne and Chatswood Chase shopping centre on Sydney's North Shore.

Under the deal, CFS will issue new units at $2, to raise $200 million via a placement underwritten by Goldman Sachs JBWere and JP Morgan Australia.

CFS's retail investors in Australia and New Zealand will also have the opportunity to acquire units under a proposed unit purchase plan, the pricing of which is proposed to be the same price as the units offered under the institutional placement.

Stockland's sole underwriter, UBS, confirmed yesterday it was raising $300 million, which was also said to be well supported.

CFS's units closed yesterday at $2.40, a 4.35 per cent rise on the day. The issue was made after the market had closed.

CFS's funds manager, Michael Gorman, said the money would be used to "enhance CFS's capital structure and financial flexibility".

"The issue will keep gearing in the middle of our preferred range, of about 25 to 30 per cent, regardless of out development exposure of about $400 million," Mr Gorman said.

He said the development pipeline was a key driver of returns for the trust and the funds would also help reduce the need for capital from debt facilities. The trust's outlook looked unchanged, despite the difficult conditions.