Frasers Centrepoint Limited to acquire 17.7% of Allco REIT and 100% of Allco REIT’s manager

Acquisition adds S$2 billion portfolio of commercial assets under management to FCL
Singapore – July 8, 2008 – Frasers Centrepoint Limited (“FCL”) today announced that it will acquire a 17.7 per cent stake in SGX-ST listed Allco Commercial Real Estate Investment Trust (“Allco REIT”), and 100 per cent of the REIT’s manager, Allco (Singapore) Limited from Allco Finance Group for S$180 million.

FCL will obtain 125.6 million units of Allco REIT at a unit price of $0.83, which is a discount of 42.4% against Allco REIT’s net asset value per unit and a premium of 16.9% against its last traded price. Allco REIT has a market capitalisation of S$504 million, with S$2 billion of commercial properties located in Singapore, Australia and Japan.

FCL Chief Executive Officer, Mr Lim Ee Seng said: “Current Allco REIT unit holders will benefit from tapping into the professional management expertise, regional footprint and resources of one of Singapore’s largest property companies.”

The Singapore Exchange had recently on 25 June 2008 issued an eligibility-to-list to FCL for the listing of its planned commercial REIT. With the acquisition of the Allco REIT units and the manager, FCL will terminate the listing plans and intends to offer the current portfolio of commercial assets as a potential pipeline for the acquired Allco REIT “Upon completion of the transaction, Allco REIT will be renamed Frasers Commercial Trust, and it will be the vehicle through which FCL will further its commercial property activities,” said Mr Lim.

“We have clear plans to bolster and strengthen the financial position of Allco REIT. FCL, as part of the Fraser & Neave Group, will be able to assist Allco REIT in negotiating the refinancing of its existing loans, which will bring clear benefits to Allco REIT’s unit holders.” said Mr Lim.

Under FCL’s management, Allco REIT is set to grow by leveraging on a ready pipeline of assets comprising S$700 million worth of quality commercial assets owned by FCL in Singapore.

“We have outlined a plan to establish three REITs in the retail, commercial and hospitality sectors. Frasers Centrepoint Trust, our Retail REIT was listed in 2006. This acquisition will deliver on our plan for a Commercial REIT. We intend to list our third REIT for our serviced residence assets in the next two to three years, subject to prevailing market conditions,” said Mr Lim.

Source : SGX

SALE OF MANAGER OF ALLCO COMMERCIAL REAL ESTATE INVESTMENT TRUST

UPDATE – INCOME SUPPORT ARRANGEMENTS IN RESPECT OF CENTRAL PARK, PERTH

ASSET VALUATIONS

Sale of Manager of Allco Commercial Real Estate Investment Trust

Singapore, 8 July 2008 – Allco (Singapore) Limited (“Manager” or “Allco Singapore”), the manager of Allco Commercial Real Estate Investment Trust (“Allco REIT”) announces that Allco Finance Group Limited and two of its indirect wholly-owned subsidiaries, Allco Singapore Holdings Limited and Allco Singapore Investments Pte. Ltd. (“Allco Group”), have entered into a Sale and Purchase Agreement dated 8 July 2008 (“Agreement”) with Frasers Centrepoint Limited (“FCL”).

Pursuant to the terms of the Agreement, Allco Group has agreed to sell to FCL for a total consideration of S$180 million:

(a) all of the issued ordinary and preference shares in Allco Singapore (for a consideration of S$75,709,405.23);

(b) its approximately 17.7% interest in Allco REIT (125,651,319 Allco REIT units (“Units”) for a consideration of S$104,290,594.77 or S$0.83 per Unit),

(the “Sale”).

The price of S$0.83 per Unit represents:

(1) a discount of 42.3% to the unaudited net asset value of Allco REIT per Unit of S$1.44 as at 31 March 2008; and

(2) a premium of 16.9% to the closing price per Unit of S$0.71 traded on the Singapore Exchange Securities Trading Limited (“SGX-ST”) on 7 July 2008, the last trading day immediately before this announcement.

The effect of the Sale is that FCL, whose ultimate holding company is SGX-listed Fraser and Neave, Limited, will, on completion, control the manager of Allco REIT.

Subject to the matters referred to below, completion of the Sale is expected to take place by 6 August 2008. A further announcement will be made upon completion of the Sale.

Completion of the Sale is subject to certain conditions precedent being fulfilled or waived on or prior to 30 September 2008 (or such later date as FCL and Allco Group may agree), including:

(a) the Monetary Authority of Singapore not raising an objection to FCL acquiring Allco Singapore;

(b) receipt of Australian Foreign Investment Review Board approval for (or no-objection to) the Sale;

(c) waiver of certain covenants under Allco REIT’s financial indebtedness to Commonwealth Bank of Australia;

(d) no breach of certain representations, warranties and undertakings given by Allco Group under the Agreement; and

(e) no occurrence of certain events which have a material adverse effect on Allco REIT or Allco Singapore and their respective subsidiaries.

Update – Income Support Arrangements in respect of Central Park, Perth

As announced on 6 May 2008, a deed of guarantee and indemnity (“Guarantee”) was entered into on 5 May 2008 by Allco Finance Group Limited in favour of APF Management Pty Limited as trustee of Central Park Landholding Trust, under which Allco Finance Group Limited agreed to guarantee payment of the income support obligations arising under an Income Support Deed referred to in an announcement on 9 March 2008.

The liability of Allco Finance Group Limited to make payments under the Guarantee will terminate when it ceases to hold a shareholding interest of at least 50% in the manager of Allco REIT. This will occur on completion of the Sale. Following that date, any recovery of income support in respect of Central Park, Perth, will be restricted to what can be recovered in the administration of Allco Principals Investments Pty Limited (Receiver and Manager appointed) (Administrator appointed).

Asset Valuations

Cosmo Plaza, Osaka
An independent valuation of Cosmo Plaza, Osaka, has been completed1. The property has been valued at JPY 5.998 billion2, which is 8.7% below the previous valuation of JPY6.57 billion as at 30 May 2007.

The valuation was conducted by K. K. Halifax Associates.

Centrelink Headquarters, Canberra
An independent valuation of Centrelink Headquarters, Canberra, has been completed3. The property has been valued at A$187.5 million4, which is 13.8% below the average of the previous valuations of A$217.5 million obtained in May 2007.

The valuation was conducted by Colliers International Consultancy and Valuation Pty Limited.

Source : SGX

A China Square Central Hotel ?

Allco REIT (Allco) announced that URA has granted a Provisional Permission in respect of the proposed Alterations and Additions (A&A) to their China Square Central (CSC) asset which will include an additional 16,000 sqm (170,000 sq ft) of GFA to the property.

Allco’s plans will include the following:

i) An additional 10-story hotel tower with approximately 350 rooms (on the additional GFA allocated)

ii) conversion of existing car parks into office space

iii) refurbishment of the existing retail space

iv) payment of a differential premium where applicable.

The development is limited to c.S$203m based on 10% of the value of Allco’s total deposited property as at 31 Dec’07.

Investors have expected an announcement on the redevelopment of CSC. However, it is too early in the process to quantify the potential impact from such a development, this plan, in our view, is inclined towards Neutral – Negative, assuming a potential increase in funding and the following considerations:

1) Strategic direction of the REIT ? Allco is essentially listed as a commercial REIT. Moving forward, the change in portfolio mix, could indicate a change in key strategic direction of the REIT.

2) Change in perceived risk profile for the REIT. The proposed hotel component (which is c.10% of total GFA), could introduce earnings volatility given the more cyclical hotel earnings business.

3) Potential dilution to earnings and distribution income in near term. Potential loss of rental income and rental rebates to current tenants during redevelopment could impact earnings. Potential interest payments capitalized during development would also affect distribution income. Assuming the project is fully debt funded, we estimate that higher interest costs could reduce DPU by c.20% from FY09 till the completion of the hotel.

4) Impact on Gearing. As at 31 Mar ’08, Allco’s gearing at 44.8%, assuming a S$203m development cost , would rise to c.50%, relatively high compared against its S-REIT peers.

As the decision to proceed is still pending Allco getting the required mandate and assessing the financial viability of this project. As such it will be too premature to assume any financial impact given that plans are still tentative. As such, we are maintaining, our earnings forecast for FY08 -FY09 and look forward to further data points and newsflow from Allco with regards to plans on CSC.

Hence, we maintain our recommendation and target price of $1.23. Based on its last closing price of $0.76, Allco is trading at an attractive 0.5x P/BV and a FY08- 09 DPU yield of 8.4-8.5%. For exposure to office sector, we prefer CCT (TP $2.93) and Suntec ( TP $1.98) given a more attractive DPU FY07-09 DPU growth in excess of c.20% and c.9% respectively.

Allco Commercial REIT (Allco) reported results for the quarter ended 31st Mar 2008 that were generally boosted by acquisitions made in 2007 compared to the corresponding period last year. Gross revenue for the period is $28.4 million (+132.1% YoY, +6.7% QoQ), net property income is $22.1 million (+115.9% YoY, +7.1% QoQ) and distributable income is $11.3 million (+42.4% YoY, -27.2% QoQ). However DPU remains flat at 1.60 cents due to the enlarged share base from the rights issue conducted in June 2007 as well as higher finance expenses.

High finance expenses eating into DPU. Finance expenses are substantially higher (+141.1% Yoy, +26.6% QoQ) as the acquisitions are essentially finance by debt. Going forward, we expect borrowing expenses to continue to be the main drag on distributable income due to the higher margin of the refinancing terms.

Growth strategy. Management attention will be focused on asset enhancement initiatives (AEI) on its Singapore properties. It highlighted a series of enhancement works on the Keypoint building. Phase 1 enhancement is expected to be completed around November 2008 and phase 2 will be around May 2009. Recent rental activity has seen leases signed at $6.39, which is an increase of 236% over the existing rent of $1.90. Current average office rental is around $3.28. Management expects to sign rental rates of $5-$8 in near-term renewals or take-ups. Almost 86% of leases are expiring in 2008 and 2009.

Divestment of Australia properties. Further to the strategic review of its portfolio, Allco has plan to divest its Australia properties, namely Central Park and expects to fully redeem its investment of AWPF. Proceeds will be used to lower leverage to 30%. Currently the gearing of Allco is 44.8%.

Income guarantee from AFGL. Allco will be receiving arrears of A$1.58 million for the period of 1 July 2007 to 31 Dec 2007 in relation to the income support deed of Central Park from Allco Finance Group Limited. There is also a potential claim of A$6.39 million for the period of 1 Jan 2008 to 26 Mar 2009.

Valuation and recommendation. We revise our estimates slightly to account for the higher rental reversions of the Keypoint building as well as higher finance expenses. We also wrote back the income support of A$1.58 million into our net income forecast for FY08. We have a FY08 DPU forecast of 7.35 cents, which translates to a yield of 8.9%. Fair value is lowered slightly from $1.07 to $1.05. We maintain our buy recommendation for Allco. Our valuation hinges on the outcome of the sale of Central Park and we will revisit our valuation pending further announcement.

Allco REIT appoints sales agents for its Australian properties