Making another Valad point

The Australian listed property market has been a roller coaster ride. In the go-go days, it was straight up, as the Macquarie Model was utilized to lever giddy heights from the likes of Centro and Valad. Hapless, staid, conservative types such as Stocklands, were looked down upon as oldies in cardies.

Well, now the oldies in cardies are still shuffling right merrily along, thank you very much, and the go go guys are getting the go go boot.

Valad sheds staff - and 36% market value

THE embattled Valad Property Group had up to 36 per cent of its market value wiped out yesterday after revealing it was cutting staff numbers by 25 per cent and planning to sell 19.9 per cent of its shares to its main investor, the Britain-based Scarborough group.

But of more concern, analysts said, was the signals that the troubled Valad Capital Services and Crownstone divisions would incur more write-downs in value. In October Valad revealed VCS had taken a $31 million hit on investments in the Queensland developer Petrac, which is now in receivership. The overall carrying value for VCS and Crownstone remains about $610 million.

As part of [its] growth strategy, Valad paid close to $2 billion for Scarborough's British residential assets in June 2007. In return, Scarborough received a 3 per cent stake in Valad and a board seat for a Scarborough director, Kevin McCabe, and about £37 million ($78 million) in cash.

However, only a few months later the British residential market was hit by the falling global market, which has weighed heavily on Valad's balance sheet. Valad still has $67 million owing for the final payment on its Scarborough acquisition and is reviewing a proposal to pay part of this in Valad equity, up to a 19.9 per cent stake, with the balance of cash owing now deferred for three years.

Fortunately for someone, but it is getting harder and harder to discern who as governments throw an opaque TARP over this stuff, the Australian government is scheming to do something about it.

According to Dow Jones NewsWires,

the Australian government [is working] with the country's major banks on a funding lifeline for the corporate sector, to compensate the possible withdrawal of credit lines by foreign banks looking to reduce their offshore lending.

In an interview with Sydney radio Friday, [Australian Treasurer Wayne] Swan recognized the need to assist Australia's commercial property sector in particular, saying the government "has a scheme in mind." He gave the strongest signal yet that the government plans to commit its own funds [stop and re-read that: "its own funds"] to backstop the sector, adding that any public funds would be used "responsibly".