Author: tfwee
AREIT – BT
A-Reit private placement raises $299m
ASCENDAS Reit (A-Reit), which is looking to raise $400 million through an equity fund-raising exercise, said in a late night announcement yesterday that the private placement tranche has been fully subscribed.
The private placement of 258 million units at $1.16 each means that a total of $299 million has already been raised.
Earlier in the day, A-Reit said its $400 million fund-raising involves a private placement and preferential offering of up to 353.93 million new units. This will be at an issue price of between $1.13 and $1.16 per new unit, it said, representing a discount of between 7 and 9.4 per cent.
A-Reit yesterday also reported net property income (NPI) of $74.2 million for its third quarter ended Dec 31, 2008, an increase of 20.9 per cent compared to a year ago.
Income available for distribution was $54 million for the quarter, an increase of 14.4 per cent year on year while distribution per unit (DPU) was 4.05 cents per unit, an increase of 13.8 per cent.
On the net proceeds from the equity fund raising, A-Reit said this will be used to fund development projects, as well as to reduce its aggregate leverage and strengthen its balance sheet.
About $200 million will be used to partly or wholly fund committed development projects and/or future development projects, while about $100 million, together with an existing $200 million committed bank credit facility, will be used towards the full repayment of A-Reit’s $300 million commercial mortgage-backed securities maturing in August.
Another $89.9 million will be used towards the partial repayment of outstanding revolving credit facilities of about $438.1 million outstanding as at Dec 31, 2008.
At end December, A-Reit had secured borrowings repayable in one year of $300 million, and secured borrowings repayable after one year of $745 million.
Unsecured borrowings repayable in one year amounted to $438 million while unsecured borrowings repayable after one year amounted to $432 million.
Tan Ser Ping, CEO of the Reit manager, said: ‘We are confident of meeting all our debt-refinancing requirements over the next two years. With the completion of the equity fund raising, A-Reit will be in a strong position to take advantage of growth opportunities which have arisen due to the current market dislocation.’
Mr Tan did add that 2009 is expected to be a difficult year given the global financial and economic crisis. Still, only 1.6 per cent of A-Reit’s portfolio’s leasable area is up for renewal for the rest of the financial year.
The overall occupancy of A-Reit’s portfolio of 88 properties is also 97.2 per cent. A-Reit said that a total of 41,766 square metres of space had been renewed in the third quarter.
Total new leases (including expansions) for the quarter were 20,671 sq m, of which 23.7 per cent was in Hi-Tech Industrial sector and 50.6 per cent was from the logistics and distribution centres.
At the close of trading yesterday A-Reit units ended at $1.26 per unit, down 10 cents.
A-Reit – BT
Ascendas Reit (A-Reit) has announced net property income increased by 20.9 per cent to $74 million for the third quarter FY2008/09 compared to a year ago.
This was attributed to organical growth of 38.2 per cent through rental rate increases.
Distribution per unit (DPU) for the three months ended 31 December 2008 was 4.05 cents per unit, an increase of 13.8 per cent on the 3.56 cents recorded in the same quarter of the last financial year. This represents an annualized yield of 11.6 per cent based on the closing price of $1.37 per unit on 31 December 2008.
As at 31 December 2008, A-REIT has 74.7 per cent of its total debt hedged into fixed rate for the next 3.7 years.
A-Reit’s manager also said it is in discussion with some of its existing lenders on the refinancing and extension of its loan facilities and will continue to explore various funding options to enhance its capital structure and to strength its balance sheet.
Suntec – OCBC
Sector news positive for Suntec
Sector news a positive… The recent news of two successful S-REIT refinancings bodes well for Suntec REIT (Suntec). Office-focused CapitaCommercial Trust has secured a 3-year term loan facility to refinance some S$580m due in March ’09, while Cambridge Industrial Trust has refinanced S$390.1m of loans. Some S$3.4b of S-REIT debt is still due for refinancing in the next 9 months but the news is overall a positive signal – especially that of Cambridge, a smaller and non-sponsored S-REIT, which was perceived as relatively higher risk. Please see our sector report out today for more details.
Waiting for the same from Suntec. Suntec has about S$825m of debt, or about 40% of its total borrowings, up for refinancing in the next 12 months. This is a lengthy process – we understand Suntec began talking to lenders late last year – and both the S-REITs mentioned here only announced done deals about two months prior to debt expiry. However, the sooner Suntec can clear this overhang, which is weighing down valuations, the better. Its cost of debt is likely to increase from the last reported all-in cost of 3.2%. The REIT is currently leveraged at 0.32x debt-to-assets.
Income outlook still bleak. Recent news reports suggest office rents fell 15-20% in 4Q CY081 . Suntec REIT, which will likely release FY08 results next week, should also register a decline in achieved rentals, in our view. The REIT will see almost 70% of its office portfolio ex One Raffles Quay up for renewal in the next two years. We are projecting Suntec City office rental rates to tumble down to single digits this year. We also expect vacancy rates to be on the rise. We estimate the average passing rent at Suntec City Office is currently in the S$6.50 ballpark, comfortably below our fairly bleak reversionary rent expectations for the next two years. On the retail side, we have priced in a conservative 8-10% per annum decline in Suntec City Mall rentals over the next two years.
Maintaining BUY. Our RNAV estimate of S$1.05 prices in a 38% decline in asset values. Our fair value estimate for Suntec is S$0.90, at a 15% discount to our RNAV estimate. We expect (non-cash) revaluation losses going forward, which could potentially stress the REIT’s tolerance for gearing. We believe our valuation reflects the risk of an equity recapitalization (which is not necessary, but possible). Suntec has seen a 21.5% increase in share price since our last report. Maintain BUY.
FrasersCT – CIMB
Taking stock
• Occupancy and shopper traffic remain high. A site visit to FCT’s three properties show occupancy levels remaining high, with the exception of Northpoint which is undergoing asset enhancement work. We are positive that rents and occupancy will stay stable in FY09.
• Outlook for FCT properties remains positive. Despite a negative macro environment, we believe that suburban retail malls such as FCT’s will be resilient with no significant new supply in the suburbs, limited lease expiries in 2009 and stepped-up rents incorporated in 86% of its leases.
• Further provision for decline in Northpoint occupancy levels. While we earlier only provided for a moderate decline in Northpoint’s occupancy to 95% from full occupancy, we now factor in a more conservative decline to 70% in anticipation of more rent-free periods or rebates which may be dished out to new tenants.
• Maintain Outperform with lower target price of S$1.06 (from S$1.13). We have a lower DPU of 7.0cts (from 7.3-7.4cts) for FY09-10 as a result of lower occupancy assumptions for Northpoint. Still using DDM valuation, we have a lower target price of S$1.06 (unchanged discount rate of 9.4%). At 0.6x P/BV, FCT remains a cheaper exposure to Singapore’s retail market than CMT (0.7x). Yields remain high at 9.9%.
CCT – BT
CCT $580m refinancing boosts shares of S-Reits
MOST Singapore-listed real estate investment trusts (S-Reits) chalked up gains yesterday as news of CapitaCommercial Trust’s (CCT) $580 million loan allayed refinancing concerns facing the sector.
Fourteen out of 21 Reits closed higher. The FTSE ST Reit Index rose as much as 6.4 per cent in the day before ending at 407.09 for an 8.96-point or 2.3 per cent gain.
Among the Reits, CCT led the rally in percentage terms with a 7 per cent or 6.5-cent increase to close at $1.00.
Fortune Reit followed close behind, jumping 6.4 per cent or 14 HK cents to HK$2.34 (S$0.45).
CCT announced on Tuesday that it had obtained a three-year term loan of up to $580 million to refinance borrowings due in March.
The trust also said that it would drop the redevelopment of Market Street Car Park into a Grade A office and commercial building.
‘Including this club loan, CCT’s latest all-in cost of debt is estimated to fall well within 4.4 per cent, which is 80 basis points higher than its current 3.6 per cent,’ said DMG & Partners analyst Brandon Lee in a note yesterday.
Nevertheless, ‘the apparent availability of credit would serve to reinvigorate investors’ sagging belief in the credit-dependent Reit model’.
Supporting this view, another Reit analyst told BT: ‘Credit is available, especially to the better-sponsored Reits, but cost of funding is likely to go up.’
In a December report last year, DBS Vickers had estimated that the all-in cost of debt for Singapore Reits could rise from an average of 3.2 per cent to over 4 per cent.
CCT’s plan to abort the redevelopment of Market Street Car Park – estimated to cost $1 billion to $1.5 billion – also won Nomura Singapore’s support.
But the outlook for CCT is not entirely rosy yet. ‘We take a positive view of the refinancing… (but) this announcement is likely to be the last significant price catalyst for CCT this year as we expect more negative news flow on falling office rents and declining office space demand,’ said CIMB analyst Janice Ding.
Concerns over possible asset writedowns and the impact on gearing also continue to loom over the Reit sector.
As the property market falls, ‘a reduction of capital values would lead to a writedown in book values of S-Reits… This would translate to a higher gearing level for S-Reits,’ said DBS Vickers in its report.