ART – Lim and Tan

A Leaf From FCT / CDLHT

• Comments by analysts after Friday’s acquisitions / divestment announcement and picked up by the press, have been neutral at worst, eg ART should have bought more Asian assets (only 2 out of 28 are in Singapore and Hanoi, Vietnam) than European ones (4 in London, 17 in France, and 5 elsewhere in Belgium, Germany and Spain).

• Yet, after the recent euro crisis, that saw the euro drop sharply against major currencies (to a low of S$1.69 on June 7th vs S$2.01 at the start of 2010), we believe buying European assets at this time would appear to be a better bet.

• As noted in our report on Friday, there could be some short term uncertainty, as had been seen at CDL Hospitality and Fraser Centrepoint , which placed out new units after acquiring hotels in Australia; Northpoint and Yew Tee shopping malls respectively.

• These placements had also hit the 2 reits in the short period after the acquisitions / placements, only to rebound after the completion of the capital raising exercises.

• We would expect the same for ART, especially given that the proportion of ART’s ebitda from master leases and guaranteed income management agreements will rise from 4% currently to 47% after the acquisitions.