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Asset sale a win-win for big business

INVESTA’S purchase of $570 million of Telstra properties early this month reflects a trend by Australia’s corporations to free their balance sheets of low-yield assets. But an added attraction is the capital raising advantages – an issue not lost on Australian governments over the past decade.

Ernst & Young corporate business partner Martin Alciaturi said the trend had been driven by a change in attitude from corporations and lenders of the value of having hard core assets on the balance sheet.

“In the old days, when banks had a very asset-backed approach to lending, it was seen as important to have property, in order to get finance,” Mr Alciaturi said.

Today, lenders were more kind and flexible in arranging finance, even without holdover property assets.

Another influence was that separating the property assets from the rest of the business lowered the cost of funds.

“If you split the property component out you can get lower costs of funds. The cost of funds of property tends to be lower than the cost of funds on a business,” Mr Alciaturi said.

He said the major banks had been selling off their properties for years, but on a branch-by-branch basis rather than as a portfolio.

“They have tended to sell individual branches to individual investors, often on a five-year lease-back,” Mr Alciaturi said.

But while the general perception was that banks were blue-chip tenants, this was not always the case, he said.

“When you think of banks one of the first things that springs to mind are the bank closures. Investors may think they have got a safe tenant, only to find the bank doesn’t renew their lease agreement,” he said.

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