Property: revaluations become the norm

Property groups GPT and FKP have joined the growing list of property managers announcing revaluations of their portfolios.

In separate announcements made to the Australian Securities Exchange (ASX), GPT and FKP warned of downward valuations to portfolios as they prepared to release annual results.

In response to an ASX letter regarding movement in the group’s share price, GPT said its net profit would be significantly lower than that in the financial year to December 2007, as a result of asset write downs and mark-to-market losses on currency and interest rate derivatives, among other issues.

The group issued a prospectus and Product Disclosure Statement in October last year that warned its profit would vary from the previous year by more than 15 per cent. But that update did not include valuations of investment properties past June 30, 2008.

The GPT Group has now undertaken valuations for its real estate portfolio. GPT told the ASX it expects to record property valuation reductions for the six months from July to December last year of around $450 million across its core Australian real estate holdings and $250 million across non-core assets.

The group also alerted the market to a write down of approximately $700 million in its joint venture with Babcock & Brown.

Together these will account for an 11 per cent reduction in the book value of the group’s portfolio of direct and equity accounted real estate investments.

Meanwhile, FKP Property Group said “like other property companies, FKP expects to book impairment charges at 31 December”.

External valuations of the properties held within the group’s managed funds (FKP Core Plus Fund and FKP Core Plus Fund Two) and the majority of assets owned by the FKP Property Trust have led the group to warn of expected write downs of $25 million.

In regards to the group’s retirement portfolio, the group said “given trends in the valuation of other types of quality property assets … [FKP] currently expects to value the portfolio on a discount rate of 12 per cent”.

This would result in a non-operating charge of around $45 to $50 million, the group said.