Month: April 2009
CMT – Kim Eng
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A shopper’s best friend
The largest landlord of retail malls in Singapore, CapitaMall Trust (CMT) offers exposure to many well-frequented malls across the four corners of Singapore. Its properties are well-located in the suburbs and even downtown, each catering to a sizeable catchment area of shoppers. CMT was the first REIT to be listed in Singapore in 2002.
Ahead of its peers
Since then, CMT has proven to be an innovative landlord, pioneering the art of asset enhancement initiatives (AEIs) to optimise space and rentals. AEIs will underpin CMT’s organic growth for the next three years at least. CMT historically trades at an average yield spread of 2.9% over the 10- year bond yield. Its current yield spread of 4.8% implies ample upside for the share price. In fact, it is still cheap relative to its own yield band of between 3.6-11.5%.
Shopping is a way of life here!
Other than Raffles City, CMT’s malls are largely located in the suburbs, catering to necessity shopping. Even Plaza Singapura that is located at the end of Orchard Road is positioned more as a neighbourhood mall, with hypermart Carrefour as the anchor, than high-end malls. CMT’s portfolio of malls has consistently achieved high occupancy rates of over 99% since 2001, with an estimated average retail passing rent of $11.80 psf per month.
Plenty of room to grow
Following the 9-for-10 rights issue to raise $1.2b, CMT will be using part of the proceeds to repay $956m of debt due in 2009, thus bringing down its gearing from 43% to 29%. Most of the balance of the proceeds will be used for the AEIs at Jurong Entertainment Centre and the Atrium@Orchard. CMT is also exploring opportunities to increase the retail GFA of Funan DigitalLife Mall and Tampines Mall.
A true industry leader
We like CMT for its market leader position, strong quality of assets, healthy balance sheet and its strong sponsor, CapitaLand. In difficult times like these, CMT’s vast potential for organic growth and earnings resilience has and will continue to deserve a premium to its peers. Initiating coverage with a BUY, a target price of $1.53.
REITs – BT
Singapore to lead Asia Reit recovery on bank funding
Real estate investment trusts in Singapore and Australia will be the first in Asia-Pacific to recover from the economic slowdown on their ability to secure funding from banks, according to a new survey.
Singapore has the region’s best environment for Reits in terms of property market growth and regulatory support, while South Korea, Vietnam and Indonesia have the worst conditions, Sydney-based Trust Company Ltd said in the annual Reit survey it published last Friday.
‘In Singapore, every Reit has so far been able to successfully refinance debt as it’s fallen due,’ Trust chief executive officer John Atkin said in an interview here. ‘They’ve been forced to take a conservative approach by the Monetary Authority of Singapore, and have been more careful with their gearing levels.’ Asia-Pacific syndicated loans excluding Japan plunged 65 per cent to US$26.9 billion in the first quarter as banks reined in lending amid the global credit crisis, according to data compiled by Bloomberg. When Singapore Telecommunications Ltd agreed to a $1.08 billion three-year loan last month to refinance maturing debt, it paid more than 10 times the interest of similar-maturity loans it signed three years ago, the data showed.
Singaporean property trusts and developers need to refinance as much as US$13 billion of debt maturing this year, the city’s The Business Times newspaper reported on April 1, citing Asian Public Real Estate Association head Peter Mitchell.
‘It’s a credit crunch, not a property crunch and by that I mean the fundamentals of the real estate market are quite good,’ UBS AG senior property analyst John Freedman said in a phone interview from Sydney. ‘The question mark is over the financing of it, and clearly more transparent markets will have a stronger chance of recovery.’ Reits across Asia-Pacific declined in the past 18 months as rents fell and the mortgage-backed securities market they use for funding dried up.
The Tokyo Stock Exchange Reit Index has plunged 68 per cent from a high of 2612.98 in May 2007, while Bloomberg’s Reit Index is down 30 per cent this year.
Australian Reits including Valad Property Group and Goodman Group have written down the value of investments and cut back spending as they repair balance sheets.
Sydney-based Goodman, whose shares slumped from a high of A$7.44 on Feb 13, 2007 to 40 Australian cents, last Friday said that it secured new leases in France at prices which matched past European rental transactions.
Standard & Poor’s yesterday cut the group’s rating to BBB from BBB+, citing the economic downturn’s impact on its biggest tenants and the company’s ‘reduced access to capital’. ‘Our market is off 73 per cent from its March 2007 peak,’ – Bloomberg
First Reit – BT
SINGAPORE – First Real Estate Investment Trust (First Reit) on Monday said that it has secured a three-year $70 million (US$47 million) multi-currency transferable loan facility from OCBC Bank.
The primary purpose of the loan is to refinance the Reit’s outstanding bank loans of $50.8 million, the healthcare Reit said. The balance will be used for funding the redevelopment of its Adam Road Hospital and for possible acquisitions in the future.
a-iTrust – BT
Ascendas India Trust, Chip Eng Seng secure loans
Trust gets $50m for refinancing, CES unit gets $60m for repayment
REAL estate business trust Ascendas India Trust (a-iTrust) and construction and property group Chip Eng Seng Corporation have secured loan facilities of $50 million and $60 million respectively – the former for refinancing and the latter for repayment of notes issued by a subsidiary.
For a-iTrust, its $50 million short-term loan, which matured on March 31, has been refinanced by the lenders, Citibank and DBS Bank, from April 1 under a new loan expiring on Sept 30, 2010, but at a higher interest rate.
The rate is 600 basis points above the Singapore dollar swap offer rate – which has been fixed at 1.046 per cent till May 29 – and works out to 7.046 per cent.
a-iTrust said that the impact of the higher interest rate on distribution to unitholders is less than 0.3 cent per unit for the financial year 2009/10.
This is due to the low gearing level, which was forecast to be below 10 per cent as at March 31.
Also, 40 per cent of the loan proceeds will be used for construction of new buildings, and the related interest expense will be capitalised.
a-iTrust,which owns real-estate for business use in India, added that its portfolio remains stable with a 98 per cent occupancy rate.
It has also renewed 90 per cent of the leases which expired in the fourth quarter ended March 31, resulting in a full-year tenant retention rate of 87 per cent.
More information on its performance is due on April 28 when it announces its full-year results.
For Chip Eng Seng Corporation, the $60 million loan was granted by Standard Chartered Bank to subsidiary CEL Development to finance the repayment of certain notes issued by the unit under a multi-currency medium term note programme.
FCOT – BT
Frasers Centrepoint Asset Management (Commercial) Ltd, as manager of Frasers Commercial Trust, said on Friday it is negotiating the terms and conditions with financial institutions to refinance $550 million of loan notes.
Previously, KPMG LLP has, in their Independent Auditors’ Report on the financial statements of FrasersComm for the financial year ended 31 December 2008, highlighted the ability of FrasersComm to continue as a going concern.
KPMG said the ability of FrasersComm to continue was dependent on the successful outcome of its negotiations with financial institutions to refinance its loan notes totalling $550 million, of which $400 million would mature on 31 July 2009, while the remaining $150 million would mature on 31 December 2009.