Month: July 2009
Cambridge – BT
CAMBRIDGE Industrial Trust is not taking up an option to buy and lease back a $55.2 million industrial property at Tai Seng Street.
The vendor, Natural Cool Holdings, announced the termination of the option agreement yesterday.
Cambridge, which was to have secured equity financing for the purchase by June 30, informed Natural Cool that it was not proceeding with the purchase.
Natural Cool secured shareholder approval for the sale back in November 2007. The plan was to sell Lot 6501T at Tai Seng Street/Tai Seng Avenue to Cambridge and to lease back the property at not more than 8 per cent of the purchase price a year. The lot had leasehold interest for 30 years with an option to renew for a further 30 years.
The agreement was later delayed after certain changes in the terms and conditions were agreed.
A-Reit – BT
ASCENDAS Real Estate Investment Trust (A-Reit) yesterday posted a net property income of $80.7 million for its first quarter ended June 30, 2009. This is 15.8 per cent more than that a year ago, due mainly to contributions from a bigger portfolio.
Income available for distribution also increased by 17.9 per cent to $61 million.
But while earnings rose, the unit base also grew from the private placement and preferential offering of new units at the start of 2009. As a result, distributable income per unit (DPU) in Q109 dropped to 3.62 cents – down 6.9 per cent from 3.89 cents in the same period last year. Taking into account units issued as at June 30, 2009, DPU in Q108 would have been 3.07 cents. On this pro forma basis, DPU in Q109 would be 17.9 per cent more.
A-Reit continued to enjoy positive rental reversion for renewed leases at its business and science parks, hi-tech industrial space and logistics and distribution centres during the downturn. The increase, however, was smaller compared with a year ago. Renewal rates at its light industrial space fell. The overall occupancy rate for A-Reit’s portfolio dropped slightly to 97.1 per cent in Q1 09, from 98.6 per cent a year ago.
As at June 30, A-Reit has 89 properties with a total book value of about $4.4 billion. The weighted lease term to expiry is about five years. Only 9.4 per cent of A-Reit’s gross revenue is due for renewal for the rest of the financial year.
‘Credit market conditions have improved in the last few months and interest margins have also improved slightly,’ A-Reit said. It added that it will continue to diversify funding sources, and it is finalising the issuance of a four-year $125 million fixed-rate note. A-Reit’s aggregate leverage as at June 30 was 35.5 per cent.
A-Reit said that its fortunes will depend largely on whether a sustainable recovery comes, especially in terms of global end-consumer demand. ‘We expect the net property income outlook for A-Reit for FY09/10 to be about the level achieved in FY08/09,’ it said. ‘However, with an expected higher cost of borrowing, the income available for distribution may be lower and will also be spread over a larger unit base.’
MIREIT – SGX
SALE OF UNITS IN MI-REIT TO MACARTHURCOOK LIMITED
MacarthurCook Investment Managers (Asia) Limited (the “Company”), as Manager of MacarthurCook Industrial REIT (“MI-REIT”), wishes to announce that the Company sold 3,500,000 units in MI-REIT (“Units”) to its immediate holding company, MacarthurCook Limited (“MCK”), on 10 July 2009 at $0.315 per Unit, the last done market price of the Units on the date of sale, via an offmarket transfer.
Rickmers – OCBC
Between a rock and a hard place
Between a rock and a hard place. We have a NEUTRAL rating on the shipping trust sector, which faces falling asset values and counterparty concerns driven by a weak shipping market. These broader issues are compounded for Rickmers Maritime (RMT) because of its high leverage (2.2x debt-to-equity as of 31-March) and sizeable contracted acquisitions that were committed to during the better days. To recap, our concerns include: 1) loan-to-value covenants on existing loans; 2) loan-to-value requirements that affect RMT’s ability to draw down committed loan facilities for the US$207m Hanjin acquisitions due in 2H09; 3) a need to repay up to US$154m in loans next year (our estimate); 4) no arranged financing for the US$711.6m in contracted acquisitions due next year; and 5) the likely redelivery of a vessel in February 2010 that could impact cash flows.
2Q DPU and its implications. At 2Q results, our focus will be on a possible update on ongoing negotiations for waivers on loan-to-value covenants; as well as the distribution amount declared for the quarter. RMT, which does not provide distribution guidance, paid out 2.14 US cents per unit in 1Q09. Coincidentally, this was the floor amount mandated under a subordination structure that expired 01 Apr. We think the 2Q DPU decision may be driven by conflicting forces: it may make sense to cut or freeze distributions entirely to save cash to fund obligations and to appease lenders. But the cash saved is small relative to what is needed. Cutting distributions could also hurt any potential equity-raising efforts, rather than help.
Don’t expect quick resolutions. Aside from the two aforementioned data points, we would be genuinely (positively) surprised if RMT is able to provide clarity on the larger issues. Our concern is that RMT is already unsustainably geared as it is; and the committed acquisitions leverage up the risk. Additionally, there is no clear roadmap of what the best solution is in this case: ideally the 2010 Maersk vessels worth US$711.6m would just “disappear” – but that may not be possible. And if an equity issue is required, unitholders will have to ask themselves if they want to fund purchases fixed at boom-time prices. With the high level of risk and no clear path out of the woods, we think it is prudent to maintain our SELL call. The recent price increase impacts the equity issue assumptions underlying our valuation. Our fair value estimate consequently increases to S$0.39 from S$0.29 previously.