Month: March 2008
MACQUARIE SINGAPORE REIT INDEX – SGX
The Benchmark Index (which has been named “Macquarie Singapore REIT Index”) is compiled and calculated independently by FTSE Group (“FTSE”).
The Singapore-listed real estate investment trusts currently included in the FTSE Global Equity
Index Series and the Macquarie Singapore REIT Index are as follows:
1. Allco Commercial Real Estate Investment Trust;
2. Ascendas India Trust;
3. Ascendas Real Estate Investment Trust;
4. Cambridge Industrial Trust;
5. CapitaCommercial Trust;
6. CapitaMall Trust;
7. CapitaRetail China Trust;
8. CDL Hospitality Trusts;
9. Fortune Real Estate Investment Trust;
10. Frasers Centrepoint Trust;
11. K-REIT Asia;
12. Mapletree Logistics Trust; and
13. Suntec Real Estate Investment Trust.
LMIR – BT
LMIR Trust makes maiden buy
LIPPO-Mapletree Indonesia Retail Trust (LMIR Trust) yesterday announced its maiden acquisition since its listing in November last year. The trust is buying Sun Plaza, a mall in Medan, North Sumatra, for $147.4 million.
The purchase will increase LMIR Trust’s asset portfolio by 15 per cent to $1.15 billion, from $1.0 billion at present.
It will also increase total net lettable area (NLA) in the trust’s portfolio by about 20 per cent to 376,035 square metres.
The acquisition will be funded 20 per cent with internal cash resources and 80 per cent with debt, drawing from a $125 million term loan facility granted by Deutsche Bank at an effective all-in cost of 6.89 per cent. The purchase takes LMIR Trust’s gearing from zero to 10.2 per cent.
The property is the largest and only upmarket retail mall in Medan, Indonesia’s third most populous city, the trust said. The mall has a land area of about 29,419 sq m and gross floor area and net lettable area of 87,188 sq m and 62,583 sq m respectively. It has a committed occupancy of 97.0 per cent for the month ending April 2008.
LMIR Trust said that there are further opportunities to improve the tenant mix at the mall to increase gross revenue and net property income.
It has identified and held preliminary discussions with many leading Indonesian and international retailers which are currently not represented at the new mall but are tenants of other properties in the trust’s portfolio, the trust said.
After the acquisition, the trust’s manager plans to explore various options to increase rentable area – such as increasing the net lettable area and reconfiguring the layout.
LMIR Trust listed on the Singapore Exchange in November 2007 with a portfolio of seven Indonesian malls and seven retail spaces in other malls. It sold some 645.5 million units at 80 cents each. The trust said then that it aims to triple its portfolio size to $3 billion by end-2009.
LMIR Trust’s shares were last traded at 57 cents.
Singapore Reit – BT
Singapore Retail Reits
Credit Suisse, March 25
UNTIL significant improvements in the credit markets, we believe operation performance will be key to S-Reits’ growth.
We like the retail sector for a number of reasons: 1) retail Reits offer another growth engine from asset enhancement initiatives (AEIs); 2) demand is expected to increase with tourism growth, while supply is not excessive; 3) retail rents and suburban occupancy have shown resilience over recessionary periods; and 4) there is room for rental growth given that prime retail rents are at 55.2 per cent discount to those in Hong Kong and retail space per capita is still one of the lowest among major economies.
Share prices have also declined significantly (-28 per cent) in the last six months, and we believe the sector deserves to trade up given the growth outlook.
We are overweight on the retail sector and CapitaMall Trust (CMT) is our top pick given its superior retail mall management franchise. Both CMT and Frasers Centrepoint Trust (FCT) have strong sponsors, with key catalysts from AEIs and acquisition pipelines. We estimate that for every $100 million of AEIs undertaken, DPU accretion is 4.1 per cent for CMT and 23.1 per cent for FCT.
Suntec – OCBC
Solid defensive play
From here to uncertainty. The “REIT as growth” story was birthed by benevolent circumstances. Markets were strong, credit was easy, and the Singapore economy was flying. The property market was booming and the REITs became a surrogate for riding the wave. Suntec REIT (Suntec) itself saw a whopping cumulative S$2.1b in fair value gains on its property assets since its inception. Its share price hit S$2.13 last summer, a 213% gain over its 2004 IPO price. Circumstances are no longer so accommodating. Share prices of retail/office S-REITs have fallen more than 20% since July, reflecting the breakdown in the credit markets and uncertainty about future growth prospects.
Revising our expectations. We are factoring in this uncertainty into our expectations for Suntec. The deteriorating US economy will likely cause Singapore GDP growth to ease. We expect expansion in the financial sector, a key driver for office rentals, to also ease. The property market seems to have already hit a plateau. Our forecasts assume office rentals will peak by 2009. However, the downward correction should be marginal as the rally has been prematurely arrested.
Strongly positioned for DPU growth. What sets Suntec apart is that over 60% of its Park Mall and Suntec office assets are up for renewal in FY08-09. Currently rented at around S$5 psf per month, these assets offer a huge potential for rental upside. Suntec also has other avenues for improving yield via floor space additions to Park Mall and asset enhancements at its retail locations. Suntec City itself is finally set to realize its true potential as the Marina area blossoms with the completion of the Circle Line and the Integrated Resorts in 2010.
Solid defensive play. The de-rating of S-REITs has given investors another opportunity to take a fresh look at Suntec as a defensive vehicle offering stable cash flows and high yields. It is trading at a 34% discount to its 1Q NAV of S$2.2. There is some concern over the expiry of the two bridge loans in 2009 relating to its One Raffles Quay acquisition, which we think is overdone. We estimate Suntec’s DPU at about 9 S cents in FY08, yielding more than 6% or 400bps over 2-yr Singapore government bond. Maintain BUY at fair value S$1.71.