Month: August 2007
SREIT – CNA
By Yvonne Cheong, Channel NewsAsia | Posted: 24 August 2007 2212 hrs SINGAPORE: Like most other property-related counters, Singapore-listed real estate investment trusts or REITs have been sold down in recent weeks amid the market volatility.
As one analyst puts it, the last time he looked, the buildings were still standing, the offices still occupied and owners still collecting rents in a robust economic environment.
But it appears that investors are not seeing REITS in the same positive light.
According to a Goldman Sachs index, Singapore REITs have fallen by 11.8 percent over the past two months.
That is a better showing than the 15.3 percent drop in its property stock index.
Analysts said a fearful climate has caused the market to under-appreciate the defensive qualities of REITs and overstate their risks.
Tony Darwell, Head of Asian Equity Research at Nomura Singapore, said: “When you look at say the Singapore office market, what we’ve seen is very, very strong growth in terms of capital value, but that strong growth in capital value has been driven by rents. We’ve not actually seen yields in the office market compressed.”
A case in point is K-REIT.
Its unit price fell by 20 percent over the last one month, while Keppel Land’s share price dropped by just 6 percent.
Analysts said they remain positive about Singapore REITs.
“There’s definitely risk in terms of outlook in the US, but given the supply demand dynamic over the next 12 to 18 months, given an expectation that rental and rental growth is likely to be relatively robust, some of the REITs in the offering – Guoco Commercial REIT, Macquarie Prime REIT, Capital Commercial Trust – look quite interesting at current valuation,” said Mr Darwell.
Analysts said REITs offer a much higher income payout than property stocks – often 100 percent, compared to 20 to 40 percent.
They also believe that Singapore-listed REITs are trading significantly below their current asset valuation.
MMP – BT
MMP Reit takes full control of mall in Chengdu
100% stake represents yield accretion of 3.4% on annualised basis
INSTEAD of acquiring a 50 per cent stake, Macquarie MEAG Prime Real Estate Investment Trust (MMP Reit) is now taking full control of Renhe Spring Department Store in Chengdu, China, for 350 million yuan (S$70.3 million). MMP Reit had in April this year announced that it would acquire a half stake in the 101,000 sq ft department store owned by Renhe Spring Group for 150 million yuan. The property, valued at 340 million yuan as at Dec 31, 2006, was re-valued at 350 million yuan as at July 31 this year.
On the increased stake, Franklin Heng, chief executive officer of the Reit’s manager, Macquarie Pacific Star, said: ‘This is a win-win arrangement…Not only will the yield accretion of this transaction for MMP Reit now be higher, Renhe Spring Group will also have more financial resources for its expansion and development projects in China, over which MMP Reit will continue to enjoy a first right of refusal.’
Renhe Spring Group’s pipeline of opportunities in China includes two other prime retail properties in Chengdu with combined gross floor area of more than one million sq ft.
The 100 per cent stake in the department store represents a yield accretion of 3.4 per cent on an annualised basis to MMP Reit’s distribution per unit, assuming full debt financing.
Between 2005 and 2006, Renhe Spring Department Store registered about 23 per cent of year-on-year retail sales growth and, for 2006, its sales were 263 million yuan.
The 350 million yuan price tag comprises 310 million yuan in cash and the assumption of an interest-free debt of 40 million yuan owed to Renhe Spring Group and repayable over seven years. Renhe Spring Group will also continue to operate the department store for a fee of 0.8 per cent of the gross turnover.
Renhe Spring Group guarantees annual net distributable profits of 26.4 million yuan, which is secured for two years by the sum of 20 million yuan to be deducted from the consideration and held in escrow.
With the completion of MMP Reit’s acquisitions in Japan in May and assuming the acquisition in China is fully funded by debt, MMP Reit’s gearing will be 31.8 per cent.
MMP Reit comprises eight properties including a 74.23 per cent stake in Wisma Atria, a 27.23 per cent stake in Ngee Ann City, and six properties in Tokyo.
Rickmers – DBS
BUY S$1.53 STI : 3,228.66
Price Target : 12-Month S$ 1.80
Reason for Report : Initiating coverage
Potential Catalyst : Acquisitions
Acquisition pipeline from Sponsor
Contracted fleet of ten vessels with staggered deliveries up to Feb 08. As at IPO, RMT’s initial portfolio consisted of five container vessels with a total capacity of 20,460 TEUs. A sixth vessel, CMA CGM Azure, was recently delivered ahead of schedule with another four to be delivered by Mar 08. As such, RMT’s fleet capacity will almost double, rising from 20,460 TEUs as at IPO to 40,910 TEUs in less than twelve months from date of listing. Following the delivery of these vessels, the average age of the vessels will be 1.1 years. These vessels are/ will be on long-term, fixed rate time charters to leading liner companies, such as Maersk Lines, CMA CGM and Italia Marittima (part of the Evergreen Group).
Pipeline. RMT recently entered into an MOU to acquire four 13,100TEU vessels, which will raise its contracted fleet capacity by 128% to 93,310 TEUs. The vessels will start to contribute from between Aug and Nov 2010 and will be chartered out to AP Moller-Maersk for ten years. Established reputation and relationship of the Rickmers Group. Rickmers Group is a leading container vessel owner and has developed strong relationships with some of the world’s largest container liner shipping companies such as Maersk Line, CMA CGM, CSAV, MSC, NOL, Evergreen, OOCL, NYK, Hamburg Sud and Hapag-Lloyd. RMT is able to leverage on
this.
Attractive growth platform – Right of First Offer/non-compete arrangements with Rickmers Group. RMT will be the exclusive vehicle of the Rickmers Group for acquiring, owning and operating containerships of at least 3,450 TEU. The Rickmers Group will also give RMT an opportunity to negotiate with and acquire from third parties, ahead of all other Rickmers Group members, any containerships of at least 3,450 TEU that have charters of more than one year.
MMP – SGX
MMP REIT TO INCREASE ITS 50% STAKE IN PRIME CHENGDU RETAIL PROPERTY TO 100%
HIGHLIGHTS
- MMP REIT to pay consideration of RMB350 million (equivalent to S$70 million)
for a 100% stake in the property - Yield accretion of acquisition will be 3.4%, assuming 100% debt financing
- Guaranteed net distributable yield out of China of 7.54% p.a. or RMB26.4 million(equivalent to S$5.28 million) p.a., for two years
- MMP REIT to enter into Business Cooperation Agreement with the Renhe Spring Group
- MMP REIT retains first right of refusal to the Renhe Spring Group’s pipeline of opportunities in China
Source : SGX