Author: tfwee
AIMSAMPIREIT – SGX
Announcement of Litigation against Nova Engineering & Logistics Pte. Ltd.
AIMS AMP Capital Industrial REIT Management Limited, as manager (the “Manager”) of AIMS AMP Capital Industrial REIT (the “Trust”), wishes to announce that the Trust has commenced legal proceedings in the High Court of Singapore (the “Suit”) against its former tenant, Nova Engineering & Logistics Pte. Ltd. (“NEL”) for NEL’s breaches of a lease agreement (the “Lease”) entered into with the Trust in relation to 7 Clementi Loop, Singapore 129811 (the “Property”).
The Trust took possession of the Property on 9 March 2010 after the Lease was terminated following NEL’s breaches of the Lease. Since the termination of the Lease, the Manager has re-leased the Property to new tenants. The Property is currently 86.0% occupied.
The Manager has been advised by its solicitors of the Trust’s strong merits in the Suit and will announce further updates as and when material developments concerning the Suit arise.
The Manager does not expect the Suit to have a material impact on the earnings of the Trust as the income from NEL under the Lease represented approximately 2.8% of the Trust’s rental income for the quarter ended 31 March 2010. The loss has been mitigated by the Manager’s leasing efforts to re-lease the Property as described above. A bank guarantee equivalent to two years’ rental income held as rental deposit in relation to the Lease has already been called.
AIMSAMP – BT
AIMS AMP Capital Industrial Reit Management Limited said AIMS AMP Capital Industrial REIT has started legal proceedings in the High Court of Singapore against a tenant, CIT Cosmeceutical Pte Ltd, for, amongst other things, arrears in rental and repossession of the property.
The property in question is 2 Ang Mo Kio Street 65, Singapore 569058.
CDL H-Trust – BT
SINGAPORE – CDL Hospitality Trusts, which owns hotels in Singapore, Australia and New Zealand, said on Wednesday it has raised S$200 million by placing 116.96 million new units with investors at S$1.71 per unit.
The price is at the bottom of the indicative range set by CDL HT on Tuesday, and represents a 9.4 per cent discount to CDL HT's volume weighted average price on June 21.
CDL HT is raising the money to pay off part of its debt.
SREIT – UBS
SREIT valuation guide
Overview
This report summarises the key statistics on valuations, performance, and capital structure of REITs listed on the SGX. We have added a new section (Table 10) on Lease Expiry profiles of SREITs. There are now 22 REITs, with a market cap of US$21.5bn. Year-to-date, SREITs have outperformed Developers by 5.3%.
Key statistics
SREITs are trading at 6.8% 2010E yield (+428bps to 10Y government bond). We expect SREIT DPU growth of 3.3% p.a. (2010-14E), with Hospitality REITs
posting the highest growth at 5.7%. Our price target implies 17.6% upside from the current share price.
Corporate news: Hotels, Retail, PLife acquisitions and Yuan de-pegging
Ibis Singapore, a three-star hotel, has been put for sale via private tender and could fetch cS$200m. The 538-room hotel is owned by the hospitality group, Accor, and LaSalle Investment Management in a 30-70 JV. Meanwhile, the Hong Leong Group CEO (Kwek Leng Beng) is working on a ‘strictly budget’ hotel concept and intends to grow this hotel segment in Singapore and Asia. In retail, the Tanglin Shopping Centre (35%-owned by M&C Hotels) is up for sale with a reserve price of S$1.25bn (S$4167psfppr). On acquisitions, PLife REIT acquired another six nursing homes in Japan for S$60.5m; Japan now comprises 29% of its assets. Finally, REITs with high China exposure are CRCT and Ascott REIT (Table 11).
Top picks: Office landlords and CDL Hospitality Trust
We like office landlords CCT and Keppel Land. We are also positive on CDL Hospitality as a beneficiary of the recovery in tourism.
PLife – UOBKH
Parkway Life REIT has announced that it is acquiring 6 nursing homes and healthcare facilities in Japan for JPY3.9b (S$60.5m). Key highlights are as follows:
- Acquisition is yield accretive. The net property yield of 8.08% is yield accretive compared to current yield of 6.97% of PREIT's existing Japan portfolio. This comes after another acquisition of 8 Nursing homes in Nov 09 for S$77.6m at a property yield of 8.29%. DPU will increase by S$0.16 cents/share in FY 10 and by S$0.32 cents/share from FY 11.
- Downside protection with rental guarantees and longer lease to expiry.Uchiyama and Bonheure, the sellers of the properties, will provide rental income guarantees for the lease period of the nursing homes. The new 20 year leases signed on the nursing homes will improve the average lease term to expiry of PREIT which stands at 13.2 years as of Mar 2010.
- Financed by 2% loan. Acquisition is financed by 5-year unsecured term loan of JPY4.2b (S$64.6m) at a funding cost of 2% pa, versus recent JPY loan of 3.22% secured in Nov 09. This will raise gearing from 28.5% to 32.2%.
- Japan properties form 28.9% of portfolio value The six nursing homes will increase the value of PREIT's Japan portfolio by 21% to S$350.5m and will bring the Japan portfolio to 28.9%, up from 25.2%, of the total portfolio value of S$1.21b.
- Leverage on Japan's ageing population. Japan has the world's fastest ageing population, with 1 of 4 Japanese expected to be over 65 years old by 2025. The acquisitions enjoy high average occupancy of 93.9% as at May 10.
- Clustering and partnership approach to benefit from economies of scale. PREIT is adopting a clustering acquisition approach going forward to reap critical mass for its acquisitions in Japan.
Valuation. PREIT is well-positioned to benefit from the yield accretive purchases and also from the high demand for nursing home space in Japan. We maintain our BUY call with a revised target price of S$1.76 (from S$1.70) based on our two-stage dividend discount model (required rate of return: 7.15% and terminal growth rate: 2.5%).