Author: tfwee
REIT Guideline – MAS
Singapore, 28 September 2007…The Monetary Authority of Singapore (MAS) has issued revised Property Fund Guidelines (REIT Guidelines). The revised Guidelines are intended to improve safeguards for investors and to provide greater clarity and flexibility for commercial transactions. The Guidelines have also been rationalised to reduce compliance costs in a number of areas.
2. The changes include:
- Enhancing the disclosure requirements on the use of short-term yield-enhancing arrangements;
- Providing guidance on permissible fixed-term management contracts;
- Disallowing discounts to institutional investors for subscriptions made at the time of listing of a REIT;
- Specifying safeguards for REITs that intend to pay dividends in excess of current income;
- Requiring a REIT to invest at least 75% of its assets in income-producing real estate; and
- Removing the 5% single party limit for investments in real-estate related securities.
3. MAS will amend the Securities and Futures Act (SFA) to include REIT management as a regulated activity. The Securities and Futures (Licensing and Conduct of Business) Regulations and Securities and Futures (Financial and Margin Requirements for Holders of Capital Markets Services Licences) Regulations will also be amended to set out the capital requirements and licence fees for REIT managers, as well as provide for a transitional period for existing industry participants.
4. In revising the REIT Guidelines, MAS considered feedback from its public consultation in March this year and held discussions with REIT players. Our responses to the comments received from the public consultation are published on the MAS website. (Click here to view) MAS will continue to engage industry players and ensure that our regulatory regime remains progressive and keeps pace with the market’s development and growth.
Source : MAS
PLife – UOBKH
An oasis in time of turbulence
Parkway Life REIT invests in income-producing real estate assets in the Asia Pacific region. The assets, used primarily for healthcare and related purposes, include hospitals, ambulatory surgery centres, primary clinics, medical office building, step-down care facilities such as nursing homes, research & development facilities and pharmaceutical facilities. The initial portfolio comprises Mount Elizabeth Hospital, Gleneagles Hospital and East Shore Hospital in Singapore.
Riding on growth in healthcare focus. The annual rental payable by Mount Elizabeth Hospital, Gleneagles Hospital and East Shore Hospital comprises a base rent and a variable rent. The variable rent is equivalent to 3.8% of adjusted hospital revenue. Adjusted hospital revenue encompasses inpatient, outpatient, car park, retail pharmacy and food & beverage revenues. This allows unitholders to ride on the growth of the healthcare industry due to an ageing population, medical tourism and growing affluence in Singapore and across the region.
Downside protection enhances defensive qualities. The minimum rent payable by each hospital is set at Consumer Price Index + 1% above rent payable in the preceding year. Where Consumer Price Index is negative for any given year, then it is deemed to be zero. This ensures that total rent payable is always increasing, which enhances the defensive quality of Parkway Life REIT.
Acquisition strategy drives growth in distribution yield. Parkway Life REIT has been granted the first right of refusal by Parkway Holdings over future sale of healthcare and related facilities. It will diversify its portfolio by acquiring medical offices, research & development facilities, storage and distribution facilities for pharmaceutical companies, and nursing homes.
Saizen – BT
Saizen Reit eyes US$150m Singapore IPO
A HONG Kong-based private equity group is seeking to raise about US$150 million through a Singapore-listed property trust based on residential buildings in Japan, sources close to the deal told Reuters yesterday.
Credit Suisse and Morgan Stanley are arranging the public offer of Saizen Real Estate Investment Trust (Reit), which will be based on an initial portfolio of residential apartment buildings valued at around US$400 million.
The buildings are located in suburban areas out of the main Japanese cities such as Tokyo. — Reuters
CCT – CIMB
Fairly valued
• On track to reach target size. In July, CCT acquired Wilkie Edge, a 12-storey mixed office, retail and serviced apartment development from its parent CapitaLand for S$182.7m. We believe CCT is on track to meet its target asset size of S$5.5bn-6bn by 2009.
• Consolidation of Malaysian exposure. CCT has redeemed its junior bonds in Aragorn ABS Berhad, which owns Wisma Technip. Following this, it has limited its exposure in Malaysia to a 30% stake in Quill Capita Trust (QCT).
• Drivers of property income remain strong. An expected rise in office rentals over the next two years, asset enhancement initiatives, increased property-development potential and acquisitions should continue to drive CCT’s growth over FY07-09.
• Increasing exposure to retail sector. CCT has been growing the retail component of its portfolio. We view this positively as increased exposure to the retail sector could lend stability and sustainability to CCT’s growth in the longer term.
• Target price reduced to S$2.75 from S$3.00; downgrade to Neutral. We have lowered our DPU estimate for FY07 by 6% following adjustments to our rental escalation assumptions (our previous estimates were slightly aggressive). We have, however, raised FY08 DPU estimate by 2% on expected rental reversions in Raffles City. Our target price, still based on DDM, has been lowered from S$3.00 to S$2.75, as we now use a higher cost of equity of 5.3% (vs. 5% previously). Downgrade to Neutral from Outperform given the lack of near-term catalysts and limited upside.
Shipping Trusts – DBS
Offering yield plus growth
Story: We attended Marine Money’s session on Shipping Trusts yesterday that was held at the Grand Hyatt Hotel. Sitting on the panel were management from the three SGX-listed shipping trusts – Rickmers Maritime, Pacific Shipping Trust and First Ship Lease.
Point: Management reiterated that the structure of a shipping trust is to deliver yield and growth, and that its performance and cashflows is not tied to the shipping cycle. In addition, shipping trusts need to deliver growth that was promised at IPO. In some cases to take advantage of opportunistic acquisitions, a strong Sponsor is clearly advantageous.
Relevance: We hold the view that shipping trusts offer attractive yields, averaging 9.4% for FY08 and are lagging US peers which are trading at an average yield of 6.7%. Maintain Buy for Rickmers Maritime (Buy, TP S$1.80) and Pacific Shipping Trust (Buy, TP S$0.52). We have no rating for First Ship Lease.
Panel represented by management from the three SGX-listed shipping trusts. Rickmers Maritime (RMT) was represented by CEO Thomas Preben, Pacific Shipping Trust (PST) by CEO Capt Subhangshu Dutt and First Ship Lease (FSLT) by President and CEO Philip Clausius.
Significant yield compression seen for US peers. Peers in the US operate under a Master Limited Partnership, a structure that is quite similar to a Shipping Trust structure. Yields have been compressed to an average 6.4% compared to listing yields of c.8%. The main trigger, we believe, was that these MLPs demonstrated an ability to grow via acquisitions. For comparison, RMT is offering a yield of 8.2%, while PST is trading at 9.7% and FSLT at 10.3%.
Growth through acquisition post listing. In our opinion, RMT and FSLT have demonstrated the ability to grow via acquisitions only after a few months of listing. On the other hand, PST has taken about a year to put in place growth initiatives. To elaborate :
(a) RMT’s Sponsor, the Rickmers Group, granted a Right of First Offer (ROFO) to RMT at IPO. Under this, nine 4,250 TEU container vessels were identified for injection into RMT. So far, RMT has entered into an MOU to acquire four 4,250 TEU vessels for delivery between Feb and Dec 2009. Separately, RMT has also entered into an MOU to acquire four 13,100TEU vessels for delivery between Aug and Nov 2010. Thus, capacity will rise 170%, from 40,910 TEUs to 110,310 TEUs by end 2010.
(b) Under the Right of First Refusal granted at IPO, PST plans to acquire two new 4,250 TEU container vessels from PIL for charter to CSAV, raising its capacity by 61% from 13,864 TEUs to 22,364 TEUs by end 08.
(c) Since IPO, FSL has acquired three product tankers, adding to its IPO fleet of four product tankers, three chemical tankers, four container vessels and two bulk carriers.
All three are below IPO prices, short-term risk is the weak US$. Besides a new asset class, we think that another factor for its underperformance has been the weakening US$. All shipping trusts generate US$-based cashflows. In the case of RMT which is S$-listed, the yield for FY08 can drop from 8.2% to 7.8% in the event that the
US$ depreciates 5% from current levels.