Month: June 2011
TCT – BT
TCT’s unit buyback boosts liquidity, valuation
Unit price rises 12% in first month of implementation
TREASURY China Trust (TCT), the first business trust to initiate a unit buyback programme, said this exercise has bolstered its liquidity and valuation.
Over the first month of its implementation to June 3, third-party trading activity accounted for 40 per cent of total trading turnover.
The period also saw its unit price rise by 12 per cent, narrowing the discount between the unit price and net asset value to 43 per cent from 49 per cent over the one-month period.
TCT said this unit buyback programme is part of its strategy to ‘proactively manage its capital structure, provide a strong platform for stable growth and ultimately increase unitholders’ value’.
This programme will continue until June 24, when TCT will enter a ‘close period’ for the release of its mid-year valuation updates and half-yearly trading results during which it is not allowed to deal with the units.
TCT chief executive Richard David said he was pleased that the programme has met its objectives in just the first month in providing liquidity, a consistent trading pattern and closing the valuation gap.
He also assured shareholders that the unit buyback scheme ‘has been implemented under a regime that values integrity above all else’.
The Business Trust Act does not provide for the specific mechanics of a buyback programme.
Under listing rules, TCT has to promptly inform the market of any acquisitions made under the unit buyback programme and units can be purchased at a price no greater than a 5 per cent premium to the average closing price of five prior trading days.
TCT is also limited to buying back no more than 10 per cent of its total issued units over a 12-month period. All units acquired under this programme are cancelled.
Listed since June last year, TCT owns commercial real estate in China comprising completed assets in Shanghai, Beijing, and Qingdao and a development pipeline. Its 800,000 sq m portfolio is valued at more than 12 billion yuan ($2.3 billion).
It reported last month a net property income of $12.45 million for the first quarter ended March 31, exceeding its forecast by 8.6 per cent and marking a 3.5 per cent improvement over the fourth quarter of 2010.
A-REIT – BT
A-Reit awarded business park site at Fusionopolis
ASCENDAS Real Estate Investment Trust (A-Reit) was officially awarded a business park site at Fusionopolis by JTC Corporation yesterday.
The industrial Reit had put in the top bid of $110 million for the 60-year leasehold site at Fusionopolis – within the one-north research hub – at the close of the state tender on May 20. The 67,300-sq-ft site at Fusionopolis Link has a maximum gross floor area of 269,200 sq ft.
A-Reit is a unit of Ascendas Pte Ltd, which is in turn a wholly-owned subsidiary of JTC.
The acquisition therefore constitutes an ‘interested person transaction’. But the deal is exempted from the usual constraints as the site was awarded by way of a public tender, said A-Reit.
The trust said that the the strategic location of the site will reinforce A-Reit’s presence and market share within the business & science parks segment while achieving economies of scale in operations.
‘The manager believes that the development of the site will provide unitholders of A-Reit with potentially greater returns compared to outright acquisitions of income-producing properties and thus improve the net asset value of A-Reit’s portfolio as A-Reit will receive any benefit of unrealised valuation gain from the development of the site,’ A-Reit said in a filing to the Singapore Exchange.
‘This property is also in line with the future economic development direction of Singapore to attract further investment from value and knowledge intensive industries.’
A-Reit shares gained one cent to close at $2.01 yesterday.
Healthcare REITs – OCBC
Maintain OVERWEIGHT on continued resilience
Promising 1Q11 results. First REIT (FREIT) and Parkway Life REIT (PLREIT) [NOT RATED] both reported healthy 1Q11 results recently, driven by both organic growth and contributions from newly acquired healthcare properties. For FREIT, gross revenue surged 95.6% YoY to S$14.6m while total distributable income jumped 88.5% YoY to S$9.9m. PLREIT’s gross revenue grew 15.2% YoY to S$21.5m and income available for distribution increased 14.4% YoY to S$14.3m. We believe that both healthcare REITs would be key beneficiaries of current inflationary pressures in Singapore. FREIT’s base rental revision for its Indonesian assets are based on Singapore’s CPI (albeit being capped at 2%), while 66% of PLREIT’s total portfolio are pegged to a CPI-linked revision formula. This signifies the likelihood of positive rental reversions for PREIT in Aug 2011.
Acquisitions to fund growth ahead. We believe that both FREIT and PLREIT have sufficient capacity to undertake more acquisitions to boost their portfolio. This is likely to be funded by debt given the current low interest rate environment and ample debt headroom that exists for both REITs. FREIT and PLREIT are able to take on S$218.0m and S$864.6m of additional leverage before hitting their regulatory gearing limit of 35% and 60% respectively.
Maintain OVERWEIGHT on continued resilience. Besides the strong sponsor support and favourable master lease terms enjoyed by healthcare REITs as highlighted in our previous report dated 10 Mar 2011, we note that both FREIT and PLREIT have continued to showcase their resilience in times of increasing global uncertainty. The share prices of both stocks have outperformed the FTSE ST RE Invest Trust Index and broader market substantially YTD. In addition, PLREIT and FREIT have helmed the top two performing positions in the SREIT universe YTD, returning 9.7% and 9.2% respectively. For the latter, we are maintaining our BUY rating although its share price has recently inched closer to our S$0.80 fair value estimate. This is due to the still attractive 8.0% prospective distribution yield offered by the counter, resulting in projected total returns of 11.9%. PLREIT’s share price has also rebounded after initial fears about the impact of the Japanese earthquake and tsunami on its nursing homes were allayed. Management highlighted that all of its 30 Japan properties were not structurally affected by the disaster and continue to be in operation. Given the defensive nature of healthcare REITs and the still sanguine outlook on the private healthcare scene in both Singapore and Indonesia, we maintain our OVERWEIGHT rating on the sector.
PCRT – BT
Perennial China 1.6 times subscribed
PERENNIAL China Retail Trust (PCRT) has raised $776.2 million from its initial public offering. At the close of its IPO, its institutional placement and public offer tranches were 1.6 times subscribed.
PCRT had initially planned to list earlier at about $1 a unit to raise some $1.1 billion but plans were put on hold in March, reportedly due to volatile market conditions. When plans were revived, its units were priced at $0.70.
PCRT had earlier secured eight cornerstone investors who subscribed for 516.65 million units. With additional units subscribed by cornerstone investor Shanghai Summit and the subscription by sponsor Perennial Real Estate under the placement tranche, these parties hold about 60.8 per cent of PCRT on the IPO’s completion.
The total offering of $776.2 million for subscription at $0.70 per unit comprised 545.221 million units (49.2 per cent of the offering) from the cornerstone investors and sponsor, while 511.451 million units representing 46.1 per cent had been placed out to international investors; and 52.128 million units (4.7 per cent) placed out to the public in Singapore.
Perennial China Retail Trust Management CEO Pua Seck Guan said: ‘We are very pleased with the warm reception that investors have given us, despite tough market conditions and a subdued appetite for new listings. We are especially encouraged by the strong support from real estate specialists, long-only funds and private wealth funds who account for over 80 per cent of the offering.’
He also went on to add that PCRT is well positioned to benefit from retail growth opportunities in China, which would allow it to provide unitholders an ‘attractive total return of strong net asset value growth and stable distributions’.
The balloting outcome for the public offer will be released today while the PCRT units will commence trading at 2pm tomorrow.
CMT, CCT – BT
CapitaCommercial, CMT plan issue of floating rate notes
CAPITACOMMERCIAL Trust (CCT) and CapitaMall Trust (CMT) intend to launch a ‘benchmark-size’ offering of US dollar secured floating rate notes this month, the trusts said yesterday.
The notes, which will be due in 2018, are part of the $10 billion multi-currency secured medium term note programme set up in September 2006.
CCT and CMT – which are both units of Singapore’s largest listed property group CapitaLand – did not provide the total value of the notes that will be issued in this tranche. But benchmark-size offerings are usually in excess of US$500 million.
Some $866 million worth of notes have been issued to-date under the programme, a spokesman said. He added that a further announcement will be made when the notes are launched, which is expected to be within this month. The notes, which will be secured by Raffles City Singapore, will be issued through special purpose vehicle Silver Oak.
CCT and CMT also said that in conjunction with the notes issue, DBS Bank, The Hongkong and Shanghai Banking Corporation (HSBC) and Standard Chartered Bank will grant a $200 million term loan facility and a $300 million revolving credit facility to the issuer. It is intended that the facilities will mature on the same date as the notes and will also be secured by Raffles City Singapore – but will be subordinated to the notes.
DBS, HSBC and Stanchart has also been appointed as the joint lead managers of the notes issue. The proceeds from the notes and facilities will be used to refinance existing borrowings, finance future capital expenditure and asset enhancement initiatives, and for general corporate and working capital purposes.
The notes are expected to be assigned an ‘AAA’ rating by Fitch and an ‘Aaa’ rating by Moody’s Investors Service, CCT and CMT said.
CCT shares gained one cent to close at $1.46 yesterday, while CMT closed unchanged at $1.95.