Month: April 2011
StarHill Global – BT
Starhill Global’s KL mall to get RM25m makeover
It will create more net lettable area and boost income
STARHILL Gallery – a mall that is part of Starhill Global Reit’s portfolio – will undergo a RM25 million (S$10.4 million) makeover that will create about 8,100 square feet in additional net lettable area.
YTL Starhill Global, the Reit’s manager, said yesterday that the asset redevelopment for the mall in Kuala Lumpur will translate to an additional net property income of about RM1.7 million per annum.
This increase in NPI represents a return-on-investment of about 7 per cent, the Reit manager added.
The works should be completed by the second quarter of this year, with the Reit manager hoping to make store fronts more visible and increase the sale of luxury products.
The renovation cost will be funded from the remaining proceeds of the rights issue by Starhill Global Reit that was completed in 2009, as well as working capital.
Two years ago, the Reit raised $337.3 million through a rights issue – joining the rest of its Reit peers in making a cash call during the financial crisis.
The additional net lettable area will be leased to Katagreen Development, which is the current master tenant of Starhill Gallery and an indirect wholly owned subsidiary of YTL Corporation Bhd, under a new master tenancy agreement.
The initial term of the new agreement will run till June 27, 2013, with an automatic renewal for a second term of three years. The new lease runs concurrently with an existing master lease tenancy agreement, the Reit manager said.
Terms and conditions under both master leases work in an increase of about 7 per cent in the master lease rent at the end of each of the first two terms.
Starhill Global Reit is held by a bankruptcy-remote special purpose vehicle (SPV), Ara Bintang Berhad (ABS SPV).
Such SPVs have operations restricted to the buying and financing of specific assets, and have their assets protected from debt obligations if the parent firm goes bankrupt.
ABS SPV and Katagreen have each a put and a call option respectively to extend the tenancy for a third three-year term when the second term expires.
Shares of Starhill Global Reit gained half a cent, or 0.8 per cent, to finish at 63 cents yesterday.
PLife – BT
PLife Reit’s Japan properties unaffected
IN AN update, the manager of Parkway Life Real Estate Investment Trust (PLife Reit) said yesterday that all its 30 properties in Japan were unaffected by the earthquake and tsunami that hit the nation last month.
‘The manager, together with our Japan asset managers and operators, have conducted further checks on our properties in Japan. We are pleased to confirm that none of our Japan properties have been structurally affected and that business at all 30 properties continue to be in operation,’ Parkway Trust Management said in a release to the Singapore Exchange (SGX) yesterday, adding that it will continue to monitor the situation.
In an earlier statement to SGX on March 13, PLife Reit’s manager noted that most of the Reit’s Japan properties are located in the Kansai and Kyushu regions, which are relatively less affected.
‘Our nearest property to the nuclear plant site (is) at least 200 kilometres away,’ it said.
Separately, it was also announced to SGX yesterday that Pulau Memutik Ventures Sdn Bhd had acquired the total issued share capital of Integrated Healthcare Holdings (IHH) from Malaysia’s sovereign wealth fund Khazanah Nasional Bhd on March 29. IHH – via indirect wholly owned subsidiaries Parkway Trust Management and Parkway Investments – holds around 216.81 million units of PLife Reit. As such, Pulau Memutik holds a deemed stake of 35.84 per cent in PLife Reit.
A-REIT – DBSV
Positioning for future growth
• Cash call to fund recent acquisition/development activities
• Dilution in FY12F but earnings kicker in FY13F
• Maintain HOLD with S$2.15 TP.
New acquisition coupled with an equity fund raising. In 2 separate announcements, Ascendas REIT announced (1) acquisition of Neuros & Immunos, located at Biopolis, for S$125.6m and (2) A private placement to raise S$400m gross proceeds at S$ 1.91-1.96/unit, representing a 4.3-6.7% discount to its VWAP on 30 Mar. We note that the placement was completed, priced at S$1.94/unit
(1) Acquisition of Neuros & Immunos for S$125.6m. Located in an emerging research hub for biomedical services at One-North, Neuros & Immunos is a multi-tenanted research and office building, and houses firms involved in neuroscience and immunology research. While we note that it caters to a specialized field, the building is understood to be 100% leased.
(2) Gross proceeds of S$400m to fund recent acquisition & development activities. Proceeds will be deployed towards its ongoing Build-to-Suit development project, selected enhancement works at Techview & 10 Toh Guan Road, forward acquisition of a business space property in Shanghai and Neuros & Immunos. We estimate these properties to return a weighted average projected yield of 7.5% vs implied cost of capital of 7.0%, hence these projects are earnings accretive.
Near term dilution, DPU growth from FY13 onwards. While we estimate there will be DPU dilution in FY12F, unitholders can look forward to a 5% uptick in DPU in FY13F as a majority of its projects are expected to start contributing positively from FY12F/13F. Our FY12-13F distribution income are adjusted downwards by 3-7% to take into account the fund raising, with TP accordingly revised down slightly to S$2.15.
A-REIT – OCBC
Buying Neuros & Immunos & Private Placement
Proposed Acquisition. Ascendas REIT (A-REIT) announced yesterday its proposed acquisition of Neuros & Immunos, located at Biopolis, from its sponsor for S$125.6m. Neuros & Immunos is a 7-storey business/science park building sited on a land area of 8,051 sqm with a 30+30 years land lease tenure effective from Feb 2005. It has a GFA and NLA of 36,931 sqm and 28,345 sqm respectively. These properties are currently 100% occupied, largely by biomedical companies with three-year rolling leases. The proposed acquisition will further diversify A-REIT’s portfolio of properties as well as the tenant-mix.
Private Placement. In addition, A-REIT closed a private placement of 209,186,000 new units yesterday evening at an issue price of S$1.94 to raise proceeds of approximately S$406m. The proceeds will be utilised in the following manner: (1) ~S$125.6m for acquisition of Neuros & Immunos; (2) ~S$117.6m to fund A-REIT’s forward purchase of a business space property in Shanghai; (3) ~S$35.9m to fund A-REIT’s eleventh development project for the construction of a BTS logistics facility next to the Airport Logistics Park; (4) ~S$97m to fund A-REITs ongoing asset enhancement initiatives at Techview and 10 Toh Guan Road and redevelopment of FoodAxis @ Senoko; (5) ~S$6.7m to pay the estimated fees and expenses incurred by A-REIT, and the balance (~S$23.2m) will be used for general corporate and working capital purposes. A-REIT will also declare an estimated cumulative distribution of 3.69 S-cents for the period from 1 Jan 2011 to the day immediately prior to the date on which the new units are issued (expected on 11 Apr 2011). The book closure is on 8 Apr and payment is around 9 May.
Dilutive Effects. A-REIT is presently also in discussion on a potential S$200m acquisition. Pending final negotiations, the transaction might be completed within the next 3-6 months. In addition, the Manager believes that there are other opportunities for BTS developments and asset enhancement initiatives ahead. Nonetheless, the private placement represents an increase of 11.2% of the total number of units in issue as at 30 Mar 2011. The dilution factor thus works out to about 10.1%. A-REIT is trading at a current PBR of 1.27x vis-à-vis its historic PBR of 1.39x since IPO. We also noted that the offer price denotes a 9.35% discount from its share price high of S$2.14 on 26 Jan (after previous ex-date). We are wary of the dilutive effects on existing shareholders (especially retail investors), given the fairly sizeable discount granted to new private placees, in our opinion. Maintain HOLD with a reduced fair value of S$2.12.
A-REIT – BT
A-Reit buys $125.6m asset, unveils placement
The property consists of two 7-storey buildings at Biomedical Grove
ASCENDAS Real Estate Investment Trust (A-Reit) is buying a property at Biopolis for $125.6 million, and is raising some $400 million through a private placement to fund the deal and other projects.
The industrial Reit is also in talks to purchase a portfolio of properties worth around $200 million, and the transaction might be completed in the next three to six months.
A-Reit gave these updates yesterday morning.
The latest property it bagged consists of two seven-storey multi-tenanted buildings – Neuros & Immunos – at Biomedical Grove. A-Reit is acquiring them from a unit of its sponsor, Ascendas.
The buildings have research laboratories and offices spread across a net lettable area of 28,345 square metres and they are fully occupied. Their sites have a lease tenure of 30+30 years from February 2005.
A-Reit said the deal is yield-accretive and would have added 0.03 cents to the distribution per unit for the financial year ended March 31, 2010, on an annualised pro forma basis.
There are some assumptions behind this; for instance that A-Reit had owned the property for the entire financial year and funded the deal using 40 per cent debt and 60 per cent equity.
The purchase price is the lower of two valuations conducted by consultants. Jones Lang LaSalle valued the property at $126 million, while CB Richard Ellis thought it was worth $125.6 million.
Transactional costs come up to around $1.9 million, which include an acquisition fee of $1.256 million payable to A-Reit’s manager.
A-Reit, in which share trading was halted yesterday, also unveiled a private placement. It will issue 206.186 million new units at $1.94 apiece to raise around $400 million in gross proceeds. Net proceeds after fees and expenses would be $393.3 million.
The private placement was ‘2.55 times oversubscribed’, A-Reit said. Its closing unit price on Wednesday was $2.04. This means the issue price carries a discount of 4.9 per cent.
The bulk of the gross proceeds will go towards buying Neuros and Immunos. Another $117.6 million is for the forward purchase of a property in Shanghai – a deal A-Reit announced earlier.
The Reit will channel another $97 million to asset enhancement works at other properties, and use $35.9 million to fund a development project.
A-Reit believes the private placement will help it ‘act more expeditiously and be more responsive when pursuing potential growth opportunities’. It revealed that it is in talks to acquire some $200 million of assets.
The private placement will also help cut A-Reit’s gearing. Its aggregate leverage as at Dec 31 was 34.7 per cent, which would fall to 32.6 per cent after revaluation gains of $307.6 million are taken into account.
Pending the deployment of the net proceeds from the private placement, the aggregate leverage goes down to 25.1 per cent.
Moody’s Investors Service does not expect the purchase of Neuros and Immunos and the private placement to have immediate impact on A-Reit’s A3 corporate family rating and Baa1 senior unsecured rating.