Property transactions dominate equity markets

It’s been a great start to 2014 for the real estate sector but the year has been full of surprises for other markets

Real estate transactions have taken the lion’s share of equity capital market (ECM) activity this quarter as other sectors saw a slow start to the year.  

A Thomson Reuters report indicates that the real estate sector accounted for 35% of total ECM transactions in the first quarter, generating proceeds worth almost $1 billion. Real estate related ECM also saw a 31.7% increase on 2013 first quarter activity.

In the year’s largest ECM issuance to date, Allen & Overy advised Citigroup on a block trade by CapitaLand of 226 million Australand stapled securities, representing a 39% stake in Australand for an aggregated US$766 million (A$848 million).

CapitaLand was advised by Clayton Utz with partners Stuart Byrne and Karen Evans-Cullen leading.

Byrne agreed that equity capital market activity had been slower than anticipated after the surge at the end of 2013, but expected it to pick up soon, especially with several IPOs on the horizon.
"There are still a lot of projects that are currently in the planning and execution phase, so there should be a lot more to come," Byrne told Australasian Lawyer.  

Byrne also believes that sectors will begin to catch up to real estate as the rest of the market evens out the distortion caused by the large volume of the CapitaLand deal.   
CapitaLand is one of Asia’s largest real estate companies and Australand is an Australian diversified property group.

This single issuance put Citigroup in the top ranking for Australian ECM underwriting in 2014.

However, results from the report also indicated that equity capital markets activity in other sectors was mixed.

The total value of first quarter ECM was US$2.8 billion, a 26.4% drop on the same time last year, and 74% down on the final quarter of 2013.
The materials sector saw the second highest amount of ECM activity accounting for 17% of Australia’s ECM. This was a 39.8% decline on 2013 first quarter ECM and the slowest start to a year in terms of proceeds since 2005.

The industrial sector was third with just short of 12% of Australia’s ECM.   

Australian partner Tony Sparks and senior associate Anand Sundaraj led the Allen & Overy team. 

Top Five Australia Equity Offerings - 2014
Issuer                                 Proceeds ($US millions)
Australand Property Group $766.6
Mermaid Marine Australia Ltd $285.3
SG Fleet Group Ltd $168.3
DUET Group $126.6
Charter Hall Group $126.2
Source: Thomson Reuters, Australia Equity Capital Markets Investment Banking Review

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