Investa Office Fund wraps up US placement

Investa Office Fund has concluded a 12-year $US125 million private placement in the US.The proceeds will repay debt.

Investa Office Fund has concluded a 12-year $US125 million private placement in the US.The proceeds will repay debt.

The Australian real estate investment trust (AREIT) sector had mixed returns over the past month, yet still outperformed the broader market.

In the past month there was more than $1 billion raised in three separate placements - $400 million each by Stockland and Mirvac and $250 million by Cromwell Property. The funds were raised to buy assets and repay debt.

There remains speculation of more asset sales, such as the remainder of the GE Capital portfolios, to the rumoured buyers Blackstone and Pacific Alliance Group.

According to JP Morgan's analysts, the leading REITs had a poor month in May, down 3.7 per cent, but performed slightly above the general market, which fell 4.5 per cent.

"REITs gave back some of April's record month (up 8.2 per cent), as the sector was impacted by a rise in the long bond. In absolute terms, REITs are up 30.8 per cent over the past 12 months and 9.6 per cent year-to-date," the brokers said.

The head of property research at Bank of America Merrill Lynch, Simon Garing, said the 33 basis point rise in 10-year government bonds over the past month prompted an 8.1 per cent sell-off in the AREITs over the past two weeks.

"In our view this takes some of the heat out of the sector following a 12 per cent rise in AREIT prices over the previous two months, with the sector now trading in line with our discounted cash flow valuations," Mr Garing said.

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