UPDATE 2-Stockland raising $1.5 bln for growth in troubled REITs

* Stockland raising up to $1.5 billion via rights stock offer

* Issue at 19 pct discount to Tuesday's closing price

* Australian REITs still under pressure as vacancy rates rise

* Shares on a trading hold pending completion of the raising (Recasts with analysts' comments, industry background)

By Eriko Amaha

SYDNEY, May 13 (Reuters) - Stockland Group (SGP.AX) announced a $1.5 billion capital-raising on Wednesday, becoming the latest Australian property firm to tap the stock market, but the sector remains under pressure due to falling values and lower demand.

Stockland, Australia's second-largest property trust, is viewed as having one of the strongest balance sheets in the sector and is accumulating cash to pounce on weaker rivals or their assets.

But with more than A$10 billion in debt maturing in the REIT sector by fiscal year 2010, more trusts are seen tapping the equity markets for capital even as the sector faces uncertainties.

"I still think that the property market fundamentals really need to improve," said Dinesh Pillutla, head of property at Aegis/PIR. "Sure, the balance sheets look much better than they did a year ago, but pressure on the property sector remains." Office vacancy rates are moving up, with the aggregate vacancy rate across Australia's main business centres rising to 6.4 percent in the first quarter of 2009 from 5.5 percent in the last quarter of 2008, as per real estate firm Jones Lang LaSalle. "The leasing market is getting apocalyptic," said Tim Green, managing director of Tim Green Commercial, an office leasing firm in Sydney. "As the buildings become more vacant, it will become more difficult to service debt."

Some of Australia's REITs don't have the luxury of tapping the equity market to raise money, analysts said, as their stock prices are too low to offer new issues.

BAD TIME TO SELL?

Moreover, the option of selling assets as an alternative to equity-raising is also less attractive amid falling prices, according to a report by Morgan Stanley this month.

The investment bank said while the disposal price will depend on the quality of the asset, discounts of 15 to 35 percent are likely as buyers demand higher returns. This could in turn lead to a devaluation of portfolios.

Stockland, however, may see attack as the best form of defence. It plans to raise up to A$1.98 billion ($1.5 billion) through a two-for-five rights offer to shareholders at A$2.70 a share, a 19 percent discount to its closing price on Tuesday.

An institutional placement of around 75 million shares at the same price would raise A$200 million.

Stockland said on Wednesday that the proceeds of the offering would be used to capture growth opportunities.