Month: December 2011
Fortune – BT
Fortune Reit eyes 2 assets for HK$1.9b
Purchases will raise gross rentable area of retail portfolio by 23%
FORTUNE Real Estate Investment Trust (Fortune Reit) is looking to acquire two retail properties in Hong Kong for a total consideration of HK$1.9 billion (S$319 million).
It expects the purchases to be yield-accretive. But it will need unitholders’ nod for the transactions, as its sponsor Cheung Kong and Cheung Kong associate Hutchison Whampoa have interests in the two assets. The relevant interested parties will abstain from voting.
Independent financial adviser CIMB has backed the proposed deals, saying that they are fair and reasonable, and in the interests of Fortune Reit and its unitholders.
The total consideration of HK$1.9 billion is below the respective valuations (as at Sept 30, 2011) of HK$1.98 billion and HK$2.02 billion by independent valuers Knight Frank and Savills.
Fortune will have to fork out another HK$49 million in fees and expenses for the acquisitions, raising the total cost of the acquisition to HK$1.949 billion.
Belvedere Garden Property at Tsuen Wan comes with a price tag of HK$1.25 billion, while Provident Centre Property at North Point costs HK$650 million. They will increase the gross rentable area of Fortune Reit’s retail portfolio by some 23 per cent to 2.4 million sq ft.
Fortune Reit has no plans to raise new equity – it will fund the HK$1.9 billion using both debt and internal funds. Its aggregate leverage, at 20.1 per cent as at Sept 30, is expected to go up to around 26.3 per cent immediately after the transactions.
Fortune Reit believes that there will be yield accretion from the deals. The two properties generated a net property income yield of 4.2 per cent for the year ended Dec 31, 2010 – higher than the yield of 3.9 per cent from its existing 14 properties.
It estimated that if it had owned the properties since Jan 1 this year, its distribution per unit for the six months ended June 30 would have been 6.7 per cent higher, at 13.66 HK cents.
But Fortune Reit needs unitholders’ approval to proceed with the deals, which involve interested parties. Cheung Kong’s aggregate indirect interest in the Reit is 31.3 per cent, and Cheung Kong also owns around 49.9 per cent of Hutchison Whampoa.
Fortune Reit will hold an extraordinary general meeting (EGM) on Jan 19 next year to seek unitholders’ consent for the acquisitions. It will also ask for authorisation for certain continuing connected party transactions between the Reit and parties linked to Cheung Kong or the Reit manager.
Independent financial adviser CIMB advised the independent board committee and audit committee of Fortune Reit’s manager to recommend that independent unitholders vote in favour of the EGM resolutions.
The transactions are at arm’s length and are on normal commercial terms, CIMB said. They are also fair and reasonable, and are in the interests of Fortune Reit, independent unitholders, and unitholders as a whole, it added.
Fortune Reit gained three HK cents yesterday to close at HK$3.77.
Industrial REITs – OCBC
Summary: Industrial REITs have proven its defensive nature YTD, having generally outperformed both the broader REIT sector and STI. On the operational level, they also put up a strong showing. Going into 2012, we expect the industrial REITs to adopt a more cautious stance on their acquisition plans. On a brighter note, despite the lower expected investments, we still anticipate industrial REITs to rake up a good set of financial performance in 2012, thanks to their proactive approaches on investment/ asset enhancement activities over the past year, built-in rental escalations and possibly further positive rental reversions. We continue to maintain our OVERWEIGHT view on the industrial-REITs subsector. Industrial REITs, we note, offer one of the highest DPU yields in the REIT space. This is in addition to the relative stability and earnings visibility in their portfolio, backed by longer term leases, diversified tenant base and security deposits. In addition, they now have stronger financial positions and greater access to capital, unlike the difficult times seen in the global financial crisis. We maintain our BUYs for A-REIT and MLT, and single out CACHE as the preferred pick for this subsector.
Charities and Cause – 2011
Attention to Readers of Singapore REITs
Thank you for taking the time in expressing your view on the poll that was conducted from Nov 22 to Nov 30 2011. Children and Youth has the highest number of votes during the polling period. Thus, we have decided to donate to the Children’s Aid Society.
| Charities and Programmes | ||||||
|
PST – BT
Income distribution forecast tough: PST
PACIFIC Shipping Trust (PST) – which will be taken private by its holding company after unitholders voted in favour of the proposed delisting yesterday – said forecasts on its income distribution could be inaccurate given the current economic uncertainty.
PST was responding to BT queries after the unitholders’ meeting yesterday, during which it also responded to criticisms that the independent financial adviser’s (IFA) report on the delisting did not account for the significant boost to revenue from recent ship acquisitions.
In early October, holding company Pacific International Lines proposed to buy up the remaining 40 per cent of PST that it does not own. The shipping firm offered 43 US cents in cash per unit, a price that the IFA, PricewaterhouseCoopers Corporate Finance, reported to the independent directors as fair.
Stuart Hong, who holds under 2 per cent of PST through his investment firm Unisysco Holdings, wanted to know the impact that the acquisition of nine vessels for charter last year would have on income distribution, he told BT on Tuesday.
On Wednesday, PST responded, saying that an independent valuer had reviewed revenue contributions from newly acquired vessels to arrive at the charter-attached valuations of the new vessels, and these were factored into the IFA’s assessment of PST’s revised net asset value.
When asked yesterday about how the additional revenue would flow through to the income available for distribution, PST said any forecast or projection of future income and distribution of the trust depends on key assumptions. These include counterparty performance, potential charter renewals and rates, the distribution policy and the timing and pricing of any equity fund raising, said PST, adding that the independent directors had made the same point to the 80-odd unitholders at the meeting.
‘Given the uncertainties in the current economic climate and the market, any such assumptions relating to the future performance of the business may not be accurate,’ it said. ‘A forecast based on such assumptions could be potentially misleading to unitholders as to the outlook for PST.’
Asked to comment yesterday, Mr Hong would only say that the meeting was ‘an opportunity to talk face-to-face and address the opposing side’s arguments’.