Merry Christmas to all reader.

MBFC whets Reit appetite again

Move by Suntec Reit comes in wake of foray by K-Reit Asia

Suntec Real Estate Investment Trust is buying a one-third interest in some properties in Phase One of Marina Bay Financial Centre (MBFC) for $1.4958 billion or $2,568 per sq ft of net lettable area.

The sellers are Cheung Kong Holdings and Hutchison Whampoa, flagship companies of Hong Kong billionaire Li Ka-shing. Suntec Reit’s manager is part of ARA Asset Management which is in turn, linked to Cheung Kong.

The deal – anticipated by some industry players – comes just weeks after K-Reit Asia said it would buy a stake in MBFC Phase One from its parent Keppel Land.

Suntec Reit will be holding an extraordinary general meeting to obtain unit holders’ nod for the acquisition. If it wins approval, it will be getting a stake in two Grade A office towers, Marina Bay Link Mall and 695 carpark lots.

MBFC Phase One was jointly developed by Keppel Land, Hongkong Land and Cheung Kong/Hutchison Whampoa.

The $1.4958 billion which Suntec Reit is paying for the Cheung Kong/Hutchison Whampoa stake includes an income support of $113.9 million.

Suntec Reit is forking out slightly less than what valuers thought the MBFC stake (including the income support) was worth as at Sept 30 – CB Richard Ellis valued it at $1.496 billion and Knight Frank at $1.497 billion.

Excluding the net present value of the income support, the price would have worked out to $1.3977 billion or $2,400 psf.

Suntec Reit yesterday shared a few details about how it would fund the acquisition and how the deal could affect its earnings.

It said that it is reviewing various financing options, which include the issuance of units or debt securities. It also expects the acquisition ‘to improve the earnings and distributions for unit holders’.

According to Yeo See Kiat, CEO of Suntec Reit’s manager, the purchase will further diversify Suntec Reit’s income stream and increase its presence in the Marina Bay area.

‘The high quality attributes of the MBFC property would offer a good long-term growth potential,’ he added.

Unit holders can expect more information when Suntec Reit releases a circular on the deal. This should happen in the next few weeks.

Suntec Reit counts Park Mall, Chijmes, a one-third stake in One Raffles Quay (ORQ) and properties in Suntec City as part of its portfolio. The net lettable area from office space is around 1.9 million sq ft. This could increase to around 2.4 million sq ft after the acquisition.

Some market watchers have been expecting Suntec Reit to purchase the MBFC stake from Cheung Kong/Hutchison Whampoa, after K-Reit said it would buy Keppel Land’s stake for $1.4268 billion or $2,450 psf (which includes a $29 million rental support).

Without the income support, the price of the MBFC stake in that deal works out to $2,400 psf.

These observers were guided by what happened in July 2007 – both Reits had announced on the same day that they would each buy a one-third stake in ORQ.

ORQ was also jointly developed by Cheung Kong, Keppel Land and Hongkong Land. Suntec Reit bought its share from Cheung Kong; K-Reit received its stake from Keppel Land.

Now that Suntec Reit has declared its intention to buy the MBFC stake, analysts will be shifting their focus on working out the financial impact of the acquisition.

With details lacking, it is hard to assess the impact of the deal now, said CIMB analyst Janice Ding. But looking at Suntec Reit’s annualised distribution yield of 6.6 per cent for the third quarter ended Sept 30, she concluded that it might not be easy for the deal ‘to be immediately accretive on the distribution per unit level’.

Suntec Reit gained two cents yesterday to close at $1.56.

Singapore, 5 March 2010 – Further to its announcement dated 9 February 2010 in relation to the non-renounceable offer for sale of 116,789,400 Series A convertible perpetual preferred units in FCOT (units in FCOT, “Units”, the Series A convertible perpetual preferred Units, the “Series A CPPUs” and the non-renounceable offer for sale by FCL Investments Pte. Ltd. (the “Vendor”) of 116,789,400 Series A CPPUs, the “Series A CPPU Offering”), Frasers Centrepoint Asset Management (Commercial) Ltd., as the manager of FCOT (the “Manager”), is pleased to announce that following the close of the Series A CPPU Offering on 2 March 2010, 36,342,116 Series A CPPUs have been accepted and will be transferred to the relevant holders of Units (“Unitholders”) and credited into their respective securities accounts on 9 March 2010 and the Vendor will be retaining 98,157,884 Series A CPPUs (including 80,447,284 Series A CPPUs which were not taken up pursuant to the Series A CPPU Offering). Frasers Centrepoint Limited will, through the Vendor and FCL Trust Holdings (Commercial) Pte. Ltd., hold an aggregate of 306,157,884 Series A CPPUs.

A Happy & Prosperous New Year to All !