Author: tfwee
MI-REIT – BT
Big recapitalisation exercise at MI-Reit
$217.1m from AMP Capital, cornerstone investors and a rights issue; $214.9m from term and bridge loans
MACARTHURCOOK Industrial Reit (MI-Reit) has announced a slew of measures to recapitalise and refinance its debts and contractual obligations.
It has proposed to raise gross proceeds of $217.1 million through the issue of new units to AMP Capital Holdings and ‘cornerstone investors’ and followed by a rights issue. In addition, it has secured credit agreements for a term loan of $175 million and a bridge loan of $39.9 million.
With these transactions, the Reit’s short-term borrowings of $226 million due to mature by the end of this year will be fully refinanced.
Under the unit placement, AMP Capital is buying a 16.1 per cent stake in MI-Reit for $22 million. MI-Reit will issue 78.6 million new units to AMP Capital at $0.28 each. The issue price is at a 31.7 per cent discount to the closing price of $0.41 on Thursday.
This will usher in the Australian investment manager as a co-sponsor of MI-Reit to join hands with existing sponsor AIMS Financial Group.
MI-Reit is also issuing 142.9 million new and fully underwritten units to certain ‘cornerstone investors’, including 9.8 million units to its principal sponsor AIMS Financial Group at $0.28 apiece. The gross proceeds of $40 million will be partially used to meet a contractual obligation to pay $90 million for a private lot at 1A International Business Park.
Following these placements, MI-Reit will undertake a two-for-one rights issue, which is also fully underwritten. It will issue 975.6 million new units at $0.159 apiece to raise $155.1 million. The proceeds will be used to pay down debts and acquire properties from AMP Capital.
MI-Reit has agreed to acquire four industrial properties in Singapore from AMP Capital for $68.6 million to diversify its sources of income. These properties have initial yields of between 8.2 and 9.6 per cent.
‘The transactions are critical for MI-Reit and will restore MI-Reit to a stable platform,’ said Nicholas McGrath, CEO of the Reit manager. ‘The key benefits will outweigh the dilutive effects of the transactions on MI-Reit’s distribution per unit and net asset value per unit, and are in the best interests of unitholders.’
Speaking at a briefing yesterday, Mr McGrath said that he expects the rights issue to enjoy a good take-up as it is attractively priced.
MI-Reit will seek shareholders’ approval for these transactions at an extraordinary general meeting on Nov 23. MI-Reit will be rebranded as AIMS AMP Capital Industrial Reit.
Mr McGrath termed the transactions ‘transformational’ for MI-Reit. The Reit will enjoy support from the new sponsor AMP Capital, whose expertise in asset management and exposure in Asia Pacific complements AIMS’s direct fund management experience and presence in Australia and China.
MI-Reit will also have the first right of refusal to acquire AMP Capital’s logistics complex at 27 Penjuru Lane in Singapore, Mr McGrath said. There are opportunities over the next eight to 12 months for asset acquisitions given the properties identified under AMP Capital and other parties, Mr McGrath added.
To show its commitment, AMP will acquire 50 per cent of the Reit’s manager from AIMS and has committed to sub-underwrite a portion of the rights issue, bringing its total investment in MI-Reit to $54.1 million. This marks its first investment in an Asian Reit.
MI-Reit has separately signed a three-year term loan of $175 million with three banks – Standard Chartered Bank, Commonwealth Bank of Australia and National Australia Bank – and a bridge loan of $39.9 million with Standard Chartered Bank. These credit facilities will be used to partially refinance a Singapore dollar term loan.
The transactions are expected to pare down the Reit’s leverage from 44.7 per cent as at Sept 30 to 29 per cent on a proforma basis, Mr McGrath said.
MI-REIT – BT
MI-Reit posts 16% fall in Q2 income distribution
MACARTHURCOOK Industrial Reit (MI-Reit) reported a 16 per cent decline in income distribution to $5.17 million for its fiscal second quarter ended Sept 30 due to higher borrowing costs.
Distribution per unit (DPU) thus fell 17.5 per cent from a year ago to 1.939 cents. The Q2 distribution represents 100 per cent of the taxable income available for distribution. Gross revenue dipped 4.6 per cent to $11.83 million largely due to a reduction in service charge revenue.
MI-Reit said its income stream continues to be supported by a 98.8 per cent portfolio occupancy rate, with a weighted average lease duration of 4.2 years.
As at Sept 30, it holds 21 properties in Singapore and Japan with a total carrying value of $490.6 million and revalued net asset value of $0.94 per unit.
Ten properties are scheduled for rental rise ranging from 1.5 per cent to 5 per cent in fiscal 2010 ending March 31.
Its manager said it expects the economic outlook to remain challenging for the rest of this calendar year.
‘With the higher cost of borrowing, the income available for distribution in fiscal 2010 will be lower than in fiscal 2009,’ it added. But rental income is expected to remain stable.
PLife – BT
Parkway Life Reit stays upbeat as Q3 DPU rises 12%
PARKWAY Life Reit yesterday reported distribution per unit (DPU) of 1.91 cents for the third quarter to Sept 30, up 12.1 per cent from 1.71 cents in the equivalent period last year.
Income available for distribution was $11.6 million, up from $10.3 million last year.
Annualised DPU was 7.65 cents for a 6.59 per cent yield, based on Parkway’s closing price on Sept 30, up from 5.9 per cent last year; or 6.32 per cent based on yesterday’s closing price of $1.21 a unit. For the three months ended June, the Reit posted a 13.7 per cent increase in income available for distribution to $11.4 million, for a DPU of 1.89 cents.
For the third quarter, gross revenue rose 23.6 per cent year-on-year to $16.5 million, from $13.3 million. Net property income was $15.4 million, up from $12.5 million.
For the first nine months, distributable income was $34.3 million, up 14.1 per cent, for DPU of 5.69 cents, up from 5 cents last year.
Chief executive officer of the Reit’s manager Yong Yean Chau said: ‘Despite the challenging market conditions, we continue to enjoy strong growth quarter after quarter.
‘We remain committed to sharpening our focus on investment and asset management and seek to execute on timely acquisition opportunities at the appropriate time, to take PLife Reit to its next level of growth.’
Parkway Life owns the Mount Elizabeth, Gleneagles, and East Shore hospitals in Singapore, and 10 assets located in Japan, including nursing homes and a pharmaceutical product distributing and manufacturing facility.
Yesterday, Parkway said it was issuing 272,262 new units to its manager Parkway Trust Management, at an average price of $1.11 as payment of 20 per cent of the manager’s fees for the third quarter.
‘While there have been positive signs of an economic recovery, we believe that there are still uncertainties in the market.
‘However, given the defensive nature of PLife Reit and the fact that 96 per cent of our total portfolio has downside revenue protection, we remain optimistic about our growth in the medium to long term,’ said Mr Yong.
PLife – Phillip
Within expectations, and we like it
Parkway Life REIT (Plife) reported gross revenue for 3QFY09 of $16.5 million (+23.6% y-o-y, +2.5% q-o-q)), net property income (NPI) was $15.0 million (+23.3% y-o-y, +2.7% q-o-q). Distributable income was $11.6 million (+12.1% yo-y, +1.6 q-o-q). DPU for the quarter was 1.91 cents (+11.7% y-o-y, +1.1% q-o-q).
The financial results came in within expectations, and we think that is a good sign. To recall, Plife completed acquisition of the Japan properties in Sep 2008, therefore there were noticeable increase in revenues from 4QFY08 onwards. From 4QFY08, quarterly revenues were relatively stable, a reflection of the stability of the underlying healthcare related assets. DPU has also been on the incline with a consistent distribution margin around 0.7 level. The annual rent increment of 4.36% of the Singapore hospitals kicks-in in August 2009 and coupled with the increase in rental from the asset enhancement carried out on a Japan property, these will provide the impetus for growth in revenue in the next quarter.
On the capital management front, Plife’s gearing is 23.2% with total debt of $249 million. $34 million denominated in SGD is due in 2H2010 while the rest is denominated in JPY and due in 2011. Refinancing is not a major concern as Plife has already gotten funding facilities in place through a $50 million credit facility and also a $500 million MTM program.
Valuation and recommendation. We make no changes to our projections and maintain our optimism in the REIT. We have a FY09F DPU forecast of 7.59 cents, which translate to a dividend yield of 6.27%. We believe Plife is on track to meet our forecast and may even surprise slightly on the upside. We maintain our fair value of $1.37and Buy recommendation.
PLife – DBS
A stable set of results
At a Glance
• 3Q09 NPI of S$15.4m within expectations
• DPU of 1.91 Scents; ex-date on 11 Nov
• Acquisitions to aid growth could materialize in near term, in our view
• Retain Buy, TP S$1.37.
Comment on Results
3Q09 within expectations. 3Q09 net property income (NPI) grew by 23.2% to S$15.4m, driven by contribution from its Japan properties, which were acquired in Sep’08. Additionally, PREIT also saw higher rental from its Singapore hospitals due to the growth in minimum rent to S$52.7m in the 3rd year of lease (23 Aug 09 – 22 Aug 10), which increased by 4.36% based on the 1%+CPI growth rate rental calculation methodology.
DPU of 1.91 Scents. DPU grew by 11.6% yoy in 3Q09 to 1.91 Scents and up marginally from 1.89 Scents in 2Q09. Ex-date is 11 Nov and payable on 14 Dec.
Gearing remains at 23.3%, good debt headroom. PREIT’s gearing remains low at 23.3%, which allows for additional debt of S$301.3m and S$989.8m before it reaches 40% and 60% gearing respectively. Available sources of funds remains diversified ranging from a S$500m MTN facility, S$126m untapped bank facilities and S$50m 3-year revolving Murabaha facility.
Recommendation
Stable growth with acquisitions. As per our report on 24 Sep 09 (Poised to acquire), we still continue to expect management to deliver acquisitions in the near term, to further enhance growth, which will be funded via debt.
Retain Buy, TP unchanged at S$1.37. We retain our recommendation, in view of its defensive features (96% of total portfolio with downside rental protection), upside rental growth with CPI-linked revisions and opportunity for growth via acquisitions. Our TP is S$1.37 based on DCF (WACC 6.6%).