Category: CMT
CMT – DMG
More details on joint development
Joint venture to develop retail/office space at Jurong Gateway. Following the successful bidding of the 195,463 sqft (18,159.1sqm) site at Jurong Gateway (JG), CapitaMall Trust (CMT), CapitaMall Asia (CMA) and CapitaLand have revealed their plan to build a retail/office commercial centre at JG. The total development cost of the project will be ~S$1.5b for a total GFA of 960k sqft, implying ~S$1,560 psf development cost. The expected NPI yield on development cost is ~6%, which is favourable compared to CMT’s current 12-mth forward yield of 5.2%. We expect incremental DPU of ~0.5-0.6S¢ beginning FY14. After factoring the potential contributions from FY14 onwards, our TP is raised to S$2.02 based on DDM (COE: 8.0%; TGR: 2.0%). Maintain NEUTRAL.
CMT’s share of project is 30%. Under the joint tender agreement, CMT/CMA/CapitaLand will hold 30%/50%/20% stake in the development. The consortium has indicated that it intends to develop the site on a 60%/40% retail/office basis. The retail mall and office are slated to commence operations in Dec 2013 and Dec 2014 respectively. Given that this is a Greenfield site, there will be no DPU accretion to CMT in the next two years.
Strategic location comes at dearer price. The latest site to be awarded sits conveniently beside Jurong East MRT and bus interchanges. Although the land acquisition cost came in at S$1,012psf ppr, 56% premium to previous acquisition cost of land at Jurong Gateway Road in Jun 2010 (won by Lend Lease), the CMT/CMA/CapitaLand joint venture’s bid price was only 5.7% premium over second bidder’s tendered price. In addition, given that the MRT and bus interchange entrance/exit will be directly facing this newly acquired site at JG, we believe the price paid for this piece of land is reasonable. Based on pre-committed rents at JCube, we believe the retail/office rents at JG can hit S$16- 18/S$6-8 psf pm. Coupled with assumed NPI margin of 75-80%, the NPI yield of the commercial development at JG is ~5-6%.
CMT – BT
CapitaLand, CMA and CMT unveil $1.5b Jurong project
CAPITAMALLS Asia (CMA), CapitaMall Trust (CMT), and CapitaLand will be developing a 25-storey retail- cum-office project on a site at Jurong Gateway which they won in a tender.
The total development cost is expected to come up to around $1.5 billion. The partners had put in the top bid of $969 million or $1,012 per square foot (psf) per plot ratio for the site.
The project will be among several new ones coming up in the area. Next door, a mixed-use development by Lend Lease is on the way.
CMA, CMT, and CapitaLand believe that their plot is the ‘most prime’ in Jurong Gateway. Behind their confidence is its connectivity – the new building will have links to Jurong East MRT station, bus interchange, and Ng Teng Fong hospital.
‘It’s a place that everybody must pass through if they’re in Jurong Gateway,’ said CMA CEO Lim Beng Chee.
Of the maximum permissible gross floor area of 957,780 sq ft, 60 per cent will be set aside as retail space. The mall is likely to take up five levels and may open its doors in time for the Christmas shopping season in 2013.
The project partners are expecting rents to be in the range of $16-18 psf. There are no plans to sign up anchor tenants because there will be large retailers in IMM and JCube – malls in CMT’s stable – and also in Lend Lease’s development, they said.
JCube, which is expected to open in the first quarter of next year, is more than 70 per cent pre- leased.
Offices – spanning 20 storeys – will take up 40 per cent of the project and may be ready in December 2014.
The partners are looking to incorporate regular- size column-free floor plates in the design and they believe rents can go up to $8 psf.
There is a lack of quality offices in Jurong and the development will fill a market void, said CEO of CMT’s manager Simon Ho.
Target tenants include government agencies, medical firms, and multinational corporations in the energy and marine sectors with operations in Jurong Island and Tuas.
The government is promoting Jurong Lake District as a new major regional centre and has released sites in the area for sale. Last year, Lend Lease won the tender for its plot with a bid of $650 psf ppr.
CMA, CMT, and CapitaLand note that Jurong Gateway is 2.5 times the size of Tampines Regional Centre and has a catchment of one million residents in the surrounding towns.
On the stock market yesterday, CMA gained three cents to close at $1.63, CMT lost a cent to $1.99, and CapitaLand rose two cents to $3.11.
CMT – DMG
Successful joint tender for Jurong Gateway site
Successful joint bid at S$969m. CapitaMall Trust (CMT), CapitaMall Asia (CMA) and CapitaLand have successfully beaten four other bidders for the 18,159.1 sqm site at Jurong Gateway (JG). Under the joint tender agreement, CMT/CMA/ CapitaLand will hold 30%/50%/20% stake in the two entities (JG Trustee and JG2 Trustee) which emerged as the winners of JG site bid. At least 40% of the GFA of JG site under development will have to be used for office purpose. Given that this is a Greenfield site, there will be no DPU accretion to CMT in the next two years. Maintain NEUTRAL with unchanged TP of S$2.00.
Strategic location comes at dearer price. The latest site to be awarded sits conveniently beside Jurong East MRT interchange station. Due to the popularity of this location, there were five bidders for the JG site, with the winning bid beating the second highest by 5.7%. Other key bidders were United Engineer, Singapore Press Holdings, Fast East Civil Engineering etc. According to CBRE, the retail/commercial assets at JG site can garner S$15/S$6 psf pm respectively. Based on JG site’s winning bid of S$1,012psf ppr, and recent JG site transaction, JG and JG2 Trustees paid 56% premium on psf ppr to the URA land sale at Jurong Gateway Road successfully won by Lend Lease Retail Investments 3, and Lend Lease Commercial Investments in Jun 2010.
We value CMT at S$2.00 based on DDM (COE: 8.0%; TGR: 2.0%). At its current trading level, CMT’s 12-month forward dividend yield is 5.4% while its spread is 3.1%. Considering that its pre-crisis mean spread was 3.0%, and there is a lack of growth catalysts in the next 12 months, we believe CMT is trading at fair valuation.
CMT, CCT – DBSV
CMT and CCT jointly extend early tender offer to buy back CMBS for Raffles City
CMT and CCT have jointly extended an early tender offer to the CMBS holders of Silver Oak SPV. The group had earlier partially funded the purchase of the Raffles City property through a revolving credit facility of S$164m and an issue of S$866m CMBS, through the Silver Oak SPV. CCT’s 60% share of the CMBS amounts to cS$520m and CMT’s 40% share is S$346m.
The notes are due to mature on 13 Sep 2011 and both CMT and CCT have extended an early offer to buyback the notes by 2 June 2011 at a purchase price of 100.25 percent of the principal amount together with accrued and unpaid interest. Notes tendered after the Early Offer Deadline but before the Expiration Deadline will be purchased at 99% of their principal amount together with any accrued and unpaid interest thereon. The tender offer will expire on 8 June 2011.
We believe refinancing this tranche of debt under the current low interest rate environment would be earnings accretive to both reits as the existing average debt cost is relatively high at 4.1-4.2%. Also, these loans are backed by an asset with strong operating performance, which saw NPI yield rising from 3.69% in 2006 to 5.46% in 2010, and low existing loan to value ratios.
Maintain BUY with TP S$2.06 for Capitamall Trust and S$1.59 for Capitacommercial Trust.
Retail REITs – CIMB
Towards greater heights
• Yoy, January retail sales ex-auto rose to their highest in 11 months. While seasonality may have distorted the data as Chinese New Year celebrations fell earlier this year than in 2010, January’s 15.6% growth was nonetheless the 15th consecutive month of positive yoy growth. The increase was also broad-based with department-store sales up 21.5% yoy, sales of apparel & footwear up 16.7% yoy and sales of watches & jewellery up 14% yoy. These segments were the leading contributors.
• New weightings and new base year for index. Every five years, government statisticians would re-weight components in Singapore’s retail sales index to “reflect changes in the structure of retail trade and food and beverage services industries.” The new base year is now 2010 instead of 2005 and the most significant change is a cut in the weighting for auto sales, from 34.5% to 24.7%. Auto sales in Singapore are affected more by the government’s private-transport policy than consumer sentiment. On the other hand, the weights for other key segments have been raised: department-store sales (+2.03% pts), apparel and footwear (+1.72%), watches and jewellery (1.63%) and tech goods (1.9%). Despite auto’s lower weighting, headline retail sales are still distorted by auto sales and this is the reason for our preference for retails sales excluding auto as a better proxy for underlying consumer sentiment.
• Discretionary spending to remain robust despite external shocks. Strong job and wage growth is likely to support further retail-sales (ex-auto) growth of about 7% this year (7.2% in 2010) and growth in real private consumption of 3-3.5% (4.2% in 2010, 0.2% in 2009). We do not expect the Japanese disasters or the unfolding events in North Africa/Middle East to have a long-lasting impact on private consumption unless global business confidence is dented in a major way in the coming weeks or months. While international airlines have been reporting light passenger loads going into Japan, outbound flights are full. And while the Japanese disasters might reduce Japanese arrivals in the near term, we maintain our overall tourist-arrival growth forecast of 8-10% for this year, to 12.8m (11.6m in 2010, government forecast of 12m-13m).
• Stock implications: FCT and CMT well-placed. With stronger retail sales expected to benefit retail tenants and drive up occupancy rates and rental reversions, we expect retail REITs like FCT and CMT to be beneficiaries. Between the two, we prefer FCT for its organic growth from asset enhancement at Causeway Point, acquisition growth potential and more resilient rental profile.