Month: May 2007
AllCo – SGX
ALLCO REIT ANNOUNCES A PROPOSED YIELD ACCRETIVE PROPERTY ACQUISITION AND A RIGHTS ISSUE
KEY HIGHLIGHTS
- PROPOSED YIELD ACCRETIVE ACQUISITION OF A 50.0% INTEREST IN THE CENTRELINK PROPERTY LOCATED IN CANBERRA, AUSTRALIA FOR S$136.5 MILLION
- PROPOSED RENOUNCEABLE UNDERWRITTEN RIGHTS ISSUE TO RAISE UP TO S$210.0 MILLION TO ACQUIRE THE CENTRELINK PROPERTY AND TO REPAY DEBT
Singapore, 25 May 2007 – Allco (Singapore) Limited (the “Manager” or “Allco Singapore”), the manager of Allco Commercial Real Estate Investment Trust (“Allco REIT”) (SGX:ALLC) wishes to announce that it has today obtained clearance from the Singapore Exchange Securities Trading Limited (“SGX-ST”) to dispatch a Unitholders’ Circular (the “Circular”) to the Unitholders of Allco REIT. The Circular seeks Unitholders’ approval in relation to:
1) The proposed acquisition by Allco REIT of a 50.0% indirect interest in a new office complex located in Canberra, Australia and which will be leased to the Centrelink National Support Office (“Centrelink”), a statutory agency of the Australian federal government (the “Centrelink Property”);
2) The signing of certain documents relating to the acquisition of the Centrelink Property;
3) The proposed renounceable underwritten rights issue of new units (the “Rights Issue”); and
4) The proposed general mandate for the issue of new units
An Extraordinary General Meeting (“EGM”) of the Unitholders of Allco REIT will be held at The Straits Room, Level 4, The Fullerton Hotel, 1 Fullerton Square, Singapore 049178 on Monday, 11 June 2007 at 09.30 a.m.
K-REIT – UBS
Pure office play with strong organic growth
- Initiate coverage with a Buy 2 rating K-REIT
- DPU CAGR of 18.7% in 2007-12E on office rental reversions
- Possible sponsor acquisitions are not priced into our model
While K-REIT does not have the right of first refusal over Keppel Land s five office assets, we believe Keppel Land is committed to growing K-REIT’s portfolio value to S$2bn over the next few years from the current S$677m.
- Valuation: one-year forward DCF price target of S$3.65
Our DCF valuation is S$3.53 per unit, with our one-year forward DCF-based price target at S$3.65 per unit. At its current price, our estimated 2007 DPU yield for KREIT is 2.8%. Among S-REITs, K-REIT provides the second lowest DPU yield to CapitaRetail China, but the highest DPU CAGR (2007-12E).
CDLHTrust – DBS
It keeps getting bigger and better
Latest acquisition creates location synergies: CDLHT recently acquired Novotel Clarke Quay for S$201m. The leasehold prime 25-storey hotel is located in the Clarke Quay area on top of the Liang Court Shopping Podium and has a land area of 12,925.4 sq m. Comprising 398 rooms, the property offers facilities such as an outdoor swimming pool, six food and beverage outlets, conference facilities, recreation facilities and 755 shared car park lots. The property recently completed a comprehensive renovation to key public areas, restaurants and all guest rooms. This is their second acquisition from third-party owners since their IPO. This acquisition helps them to become the biggest hotel landlord in Singapore, in terms of number of rooms. All five hotels in Singapore are actually within the same cluster area of Clarke Quay/ Havelock Road area which will create a clustering effect on the portfolio and synergistic effect on the room rates.
More hotels potentially injecting to the trusts: CDLHT has a pre-set agreement with M&C and CDL related groups that all the present and future development under their group in Singapore will all contain first right of refusal. Currently, Copthorne Orchid Hotel (440 rooms) is the only one that is in operation with this clause. Future developments under this agreement include the luxurious St Regis Singapore in Cuscaden Road (299 rooms, owned by CDL/Tid/Hong Leong Group, to be opened by end 2007) as well as a hotel in Mohammad Sultan Road (350 rooms, owned by M&C, to be opened in 2008). The two, together with Copthorne Orchid Hotel, will potentially add over 1,000 quality hotel rooms to their portfolio after 2 – 3 years of maturity.
Maintain Buy, Target Price S$2.40: The inclusion of the Novotel Clarke Quay will increase their market share in the Singapore hotel section. As the current hotel demand is outweighing supply, with upcoming mega events such as Formula 1 race in 2008 and the upcoming Integrated Resorts and conventions to further fuel the visitor arrival numbers, these should greatly benefit the hotel operators in Singapore. All the above news will contribute to the growth of the company and support our 15% y-o-y increase in hotel RevPAR for the portfolio. Maintain Buy, target price of S$2.40 at parity to our DCF calculation.
Hospitality REITs – UOBKH
Hospitality REITs – Where’s The Cream?
Hospitality, a mixed segment. Amongst the hospitality REITs which is represented by three stocks, CDL Hospitality Trust (CDREIT) provides a proxy to the tourism play, Ascott Residence Trust (ART) to the serviced residence segment, and First REIT (FIRT) to the healthcare industry. In comparison, CDREIT is very much Singapore-focused while the latter two offers a more regional exposure.
Remaking of Singapore main catalyst. Remaking of Singapore as a global city and ‘hub of hubs’ has brought about tremendous benefits to the hospitality industry and the hospitality REITs benefit in the following ways:
a) CDREIT – The tourism story in Singapore is well-known following the construction of IRs and the license to hold the Formula One Grand Prix. Hotels are set to benefit from the increase in visitor arrivals and room rates should rise in view of the short term limited supply of hotel rooms.
b) ART – Business and financial hub status of Singapore and growth of other Asian cities will spur demand for serviced apartments for expatriates and professionals. Globalization is a key factor in demand for serviced apartments in strategic locations worldwide. ART offers a regional exposure with assets in strategic locations.
c) First REIT – Beneficiary of medical tourism and Singapore as a healthcare hub with exposure to Indonesia and Singapore. First REIT has a higher yield in part of its riskier assets in Indonesia.
CDREIT to benefit in the short term. We believe that In the remaking of Singapore, tourism is a more compelling catalyst to the segment and CDREIT will benefit most in the short term. In addition, it has recently made its second acquisition of the Novotel Clarke Quay hotel since IPO, after its first acquisition of the Rendevous Hotel Auckland. The acquisition is expected to increase its DPU by 8.9% with an annualised property yield of 5.5% in FY07.
Our sensitivity analysis indicates that for every 10% increase in room rates, CDREIT’s yield will increase 0.25%-0.28%.
CDL HTrust – BT
CDL H-Reit buys Clarke Quay hotel
Novotel Clarke Quay purchase prices 398-room hotel at $219.8 million
CDL Hospitality Real Estate Investment Trust (CDL H-Reit) has purchased the Novotel Clarke Quay in a deal that prices the 398-room hotel at $219.8 million or about $552,000 per room. The amount comprises a purchase amount of $201 million and assumption of potential liability of about $18.8 million. The hotel site has a remaining lease of about 70 years.
For the seller, a Lehman Brothers entity, the divestment represents a doubling of its investment. Lehman bought the hotel, then known as Hotel New Otani, in 2004 for $82 million from a Wuthelam Group-controlled entity and spent a further $19 million renovating it, resulting in an all-in investment of around $101 million. It later appointed French hotel chain Accor to manage the hotel under the four-star Novotel brand.
Jones Lang LaSalle Hotels brokered the latest sale.
CDL H-Reit is part of a stapled group, CDL Hospitality Trusts, which is listed on the Singapore Exchange. Singapore-listed City Developments Ltd’s London-listed hotel arm, Millennium & Copthorne Hotels (M&C), has a 39 per cent stake in CDL Hospitality Trusts.
The yield-accretive acquisition of Novotel Clarke Quay will boost CDL Hospitality Trusts’ Singapore hotel room count by around 20 per cent to 2,324, making it Singapore’s biggest hotel owner, in terms of number of rooms. The acquisition will also see the value of the trusts’ properties grow from about $1.1 billion to $1.3 billion.
CDL H-Reit will enter a lease agreement appointing the hotel’s incumbent manager Accor SA to manage and operate the hotel under the Novotel flag until end-2020, for a fee that works out to a tad below 10 per cent of the hotel’s gross operating profit. The projected annualised property yield of the hotel for this year is about 5.5 per cent, higher than the 3.9 per cent implied property yield for CDL H-Reit’s current portfolio for the current year.
The acquisition is forecast to boost annualised 2007 distribution per unit (based on Q1 2007 results) by 8.9 per cent, from 7.10 cents to 7.73 cents. Vincent Yeo, CEO of M&C Reit Management Ltd, the manager of CDL H-Reit, said that assuming the acquisition of Novotel Clarke Quay is fully funded by debt, the trusts’ gearing ratio will increase from 35 per cent to 46 per cent. He said that while the trust is on the lookout for more hotel acquisitions in the Asia-Pacific – in countries like China, India, Philippines and Vietnam – Singapore still remains one of his favourite markets because of its growth potential and risk profile.
For Q1 2007, CDL Hospitality Trusts’ Singapore hotels achieved a 25.4 per cent year-on-year increase in revenue per available room (RevPar). ‘Based on the strong performance so far in the second quarter, the industry players expect a much higher year-on-year RevPar growth in Q2. And we expect that to be the same for the hotels in the CDL Hospitality Trusts.’
The acquisition of Novotel Clarke Quay will increase CDL Hospitality Trusts’ exposure to the strong Singapore hotel market, which is expected to benefit from continuing strong growth in visitor arrivals and minimal new hotel room supply this year and next.