Month: August 2009
AREIT – BT
A-Reit issuing new units to raise $302m
It says new funds could strengthen its capital structure
ASCENDAS Real Estate Investment Trust (A-Reit) is looking to raise at least $301.6 million through a private placement of new units – just months after a $408 million cash call in January.
The private placement will ‘strengthen A-Reit’s balance sheet to take advantage of potential investment opportunities’, said Reit manager Ascendas Funds Management’s CEO and executive director Tan Ser Ping.
A-Reit asked to halt trading in its units yesterday morning and said it is issuing 185 million new units to institutional investors at between $1.63 and $1.70 apiece. The new units are equivalent to 11 per cent of the 1.68 billion units in issue as of June 30.
The issue price range represents a discount of 3.8 to 7.8 per cent to the volume weighted average unit price last Friday.
The Reit manager, with joint lead-managers and underwriters Cazenove & Co (Singapore) and DBS Bank, will determine the issue price through a book-building process. The process started yesterday and should finish today.
After setting aside $5.6 million for fees and expenses, A-Reit will have net proceeds of around $296 million. Of this, $175.4 million will go towards developing a high-tech built-to-suit facility for Singapore Telecom.
SingTel will lease the property off Upper Paya Lebar Road for 20 years and has an option to extend the lease for another 10 years.
A-Reit will use another $120.6 million for potential acquisitions of income-producing properties and built-to-suit development opportunities.
‘A pipeline of potential investment opportunities at different stages of development has been established and some of these may gradually materialise as the economic condition stabilises,’ Mr Tan said.
A-Reit also said the new funds could strengthen its capital structure and allow it to borrow more at potentially better terms. Should it use all the net proceeds to repay debt, its aggregate leverage would fall from 35.7 per cent at Aug 9 to 29.3 per cent.
Analysts BT spoke to yesterday were not completely taken aback by A-Reit’s latest cash call – some noted that its gearing is relatively high in the sector and new funds may help bring that down.
A CIMB report last week showed that A Reit’s leverage is higher than that of at least eight other Reits, based on last reported figures.
The buoyant stock market may have facilitated fund-raising too, some analysts said.
To ‘ensure fairness’ to holders of existing units, A-Reit will give them an advanced distribution of distributable income for the period from July 1 to the day immediately before the date on which the new units will be issued.
MI-REIT – BT
MI-Reit Q1 DPU drops 36% to 1.51cents on higher loan costs
MACARTHURCOOK Industrial Reit (MI-Reit) has announced a distribution per unit (DPU) of 1.51 cents for its first quarter ended June 30, down 36 per cent from a year ago.
Higher borrowing cost was one factor for the fall. Borrowing costs were higher because of the increase in interest margins and facility fees when the repayment date of the Reit’s Singapore term loan facility was extended to Dec 31, 2009 during the quarter.
Net property income for Q1 was $9.3 million, 3.2 per cent higher year-on-year, as the portfolio’s high occupancy was maintained.
The Reit said organic rental growth was supported by built-in rental escalations staggered throughout the leases of 19 of the properties.
In FY2010, seven properties are scheduled to experience 5 per cent rental increases and three properties will see rental increases of 3.25 per cent, 3 per cent and 1.5 per cent.
With the higher cost of borrowing, the income available for distribution in FY2010 will be lower than in FY2009, the Reit said. ‘However, barring any further unforeseen events, the manager expects rental income to remain stable.’
PLife – DBS
Getting even more Life-ly
At a Glance
• 2Q09 net property income of S$15.0m in line with consensus and our estimates; DPU of 1.89cents
• New S$50m Islamic facility adds diversity to funding sources
• AEI at P-Life Matsudo for S$2.56m, increase gross rental from asset by 19.4% and DPU by 0.042cents
• Maintain Buy, TP revised to $1.17.
Comment on Results
2Q09 stable as it is. Net property income (NPI) grew 27.9% to S$15.0m, lifted by contributions from its Japanese assets acquired in 2H08 and a higher rental pegged to CPI rate (6.25%) for its Singapore hospitals. NPI margin was slightly lower at 93% vs 93.7% in 2Q08 due higher expenses from the Japanese assets.
DPU of 1.89cents for 2Q09. DPU remained similar to 1Q09 at 1.89cents but registered a growth of 13.7% yoy from 1.66cents in 2Q08. The DPU translates into an annualized yield of c.7% at current price. Ex-date for the dividend is 13 Aug.
S$50m Bank Murabaha facility; low gearing of 22.7%. It has been offered a S$50m 3-yr Revolving Murabaha Facility with Islamic Bank of Asia. This is on top of its S$500m MTN facility and S$126m untapped bilateral bank facility. Hence, P-Life has the flexibility to tap on diversified sources of funds. Gearing remains at a very healthy 22.7%, providing gearing headroom of S$308m and S$996m before the REIT reaches the targeted 40% and 60% maximum gearing levels.
AEI at P-Life Matsudo. The REIT completed a JPY160.1m (S$2.56m) AEI at its P-Life Matsudo asset, involving the conversion of existing utility space into a device manufacturing room. This will increase gross rental of the asset by 19.4% and DPU by c.0.042cents.
Recommendation
Maintain Buy, TP raised to $1.17. We like PREIT for its stable revenue stream, with protection against downward revision, and potential to deliver acquisitions given its debt headroom. We raised our DPU up slightly by c.5-6% for FY09F and FY10F as we revised up our rental assumptions for its Singapore hospitals and a higher NPI from its Japanese assets. Consequently, our DCF-derived TP is adjusted to S$1.17 (WACC 6.6%, terminal growth 1%).
PLife – Phillip
Parkway Life (Plife) REIT reported gross revenue for 2QFY09 of $16.1 million (+28.9% y-o-y, -1.5% q-o-q)), net property income was $15.0 million(+27.9% y-oy, -1.3% q-o-q). Distributable income was $11.4 million(+13.7% y-o-y, flat q-o-q). DPU for the quarter was 1.89 cents (+13.8% y-o-y, flat q-o-q).
The growth in revenue comes mainly from the contribution of Japanese properties that were acquired in 3Q08 and also the annual revision of rental from the Singapore hospitals that took effect from August 2008. It can be seen that from 4Q08 onwards, revenue and DPU were fairly stable. The REIT manager further announced that the Singapore hospitals rental is set to increase by 4.36% beginning 23 August 2009. Revenue is also expected to get a boost from the increase in rental of the P-Life Matsudo property following completion of an asset enhancement initiative (AEI) to maximize plot ratio.
Plife REIT has no short term refinancing concern with a gearing of 22.7%. Total debt is $242 million with $34 million coming due in 2nd half 2010 and the rest in 2011. Plife has in place a $500 million multicurrency MTM programme as well as a newly secured $50 million Islamic revolving credit facility.
Being exposed to the relatively stable healthcare sector, Plife REIT has shown resiliency in the recession. The inflation linked revenue model ensures revenue is downside protected. We revised up our revenue forecast to factor in the growth from the annual revision of the Singapore hospitals and from the Matsudo property. Our FY09F DPU remains unchanged at 7.59 cents while FY10F DPU rises from 7.56 cents to 7.71 cents. Fair value revised upward from $1.19 to $1.21.