CMT inks deal to buy Iluma for $295m

CapitaLand unit CapitaMall Trust (CMT) has agreed to buy Iluma, a shopping mall in Bugis, for $295 million.

Iluma is located at Victoria Street opposite Bugis Junction, which is one of CMT’s existing properties. The mall has a net lettable area of 185,190 square feet and is connected by an overhead link-bridge to the second storey of Bugis Junction.

CMT is buying the mall from Jack Investment, a private local property development and investment company. Previous media reports have put Jack Investment’s investment in Iluma at around $160 million.

With the acquisition of Iluma, CMT’s portfolio increases to 16 shopping malls. CMT is the largest real estate investment trust (Reit) in Singapore by asset size. Its portfolio is valued at around $8.1 billion.

‘The acquisition of Iluma is exciting as we see a lot of opportunities to integrate it with our Bugis Junction,’ said Simon Ho, chief executive of the trust’s management team. ‘The two malls are already connected by an overhead link-bridge and we see scope to create an enlarged and seamless shopping destination that will appeal to locals and tourists.’

Bugis Junction, with its direct connection to the Bugis MRT station and central location, already attracts strong shopper traffic of more than 3.2 million per month, Mr Ho said.

The integration of Iluma with Bugis Junction will create a combined shopping destination with net lettable area of more than 606,000 sq ft, about the size of CapitaLand’s Ion Orchard mall on Orchard Road.

At the price of $295 million and based on the current rental rates, occupancy of 83.7 per cent and entry yield of just under 4 per cent, the acquisition is yield accretive to CMT’s current portfolio, Mr Ho explained.

He added: ‘With its prime location next to Bugis MRT station and planned integration with our Bugis Junction, we are confident that the occupancy of Iluma can match Bugis Junction’s occupancy of 100 per cent and its property yield can be boosted to be in line with the other malls in our portfolio.’

CMT shares gained three cents to close at $1.81 yesterday.

Capitamall Trust buys Iluma for S$295 mln

SINGAPORE – Singapore's CapitaMall Trust Management said on Monday it has entered an agreement to buy a shopping mall in the city-state, Iluma, for S$295 million ($231 million).

'Iluma is a new shopping mall in Singapore located at Victoria Street opposite the popular Bugis Junction, one of CMT's existing properties. The mall has a net lettable area of 185,190 square feet,' CapitaMall Trust said in a statement.

CapitaMall is part of Singapore's CapitaLand, Southeast Asia's largest property firm.

CMT’s first retail bonds 1.9 times subscribed

CAPITAMALL Trust (CMT) announced yesterday that its two-year retail bonds were 1.9 times subscribed. In particular, the bonds under the public offer were four times subscribed, receiving valid applications of $206.47 million when the offer closed at noon on Feb 23.

In response, CMT increased the bond offer from $200 million to $300 million. An amount of $175 million has been allocated to retail investors, while $125 million has been allocated to the placement tranche, it added.

CMT had initially allocated $50 million of the bond offer to retail investors and $150 to the placement tranche.

The issue price of the 2 per cent bonds, due 2013, will be $1 per $1 in principal amount, ie 100 per cent of the principal amount of the bonds.

‘We are very encouraged by the strong response to our first retail bond offer,’ said Simon Ho, chief executive of CapitaMall Trust Management, which manages CMT.

Expressing regret that they were unable to fully satisfy all the demand in its inaugural offer, he added: ‘Investors can look forward to opportunities to participate in our future offers under the $2.5 billion retail bond programme that we have set up.’

The bonds – which have received a final credit rating of A3 from Moody’s – will begin trading on the Singapore Exchange at 9am on Feb 28 in board lot sizes of $1,000.

The bond issue is not expected to have a material effect on the net asset value and earnings per unit of the CMT group for the current financial year, it said.

CMT units closed trading one cent higher at $1.78 yesterday.

Retail Bond Issue – A First for S-REITs

Retail Bond Issue. CapitaMall Trust (CMT) has recently announced the establishment of S$2.5b Retail Bond Programme. As a start, it is offering S$200m 2-year retail bonds at a fixed coupon rate of 2%. In the event of oversubscription, CMT may increase the size of the retail bond to S$300m. This issue marks the third corporate retail-bond offering (after SIA and CMA) in less than six months. One of the reasons for doing so is to lock in the low interest rate (fixed rate) before further rate hikes. As of 31 Dec 2010, CMT has an average cost-of-debt of 3.7%, with about 98.7% of total debt on fixed rate basis. On the back of the successful offering from its sponsor CMA, we view this move positively as it helps to lower the average cost-of-debt for CMT. Recall that CMT has S$601.2m convertible bonds due in 2013, with a put option on 2 July 2011. It also has an additional S$346.4m of CMBS and S$38m RCF1 maturing in 2011. We think the proceeds from the retail bond issue may be used to repay some of these borrowings. We have thus lowered our average cost-of-debt estimates by 15bps for our valuation, in anticipation of the successful take-up of the retail bonds.

Operational Performance. Despite the financial crisis, we have seen both CMT’s gross revenue and net property income (NPI) growing at a CAGR of 6.6% and 10.2% respectively since FY2008. If we exclude the newly acquired properties (Clarke Quay & Atrium@Orchard) during this period, the CAGR is around 3.3% & 7.1% respectively. Notably, properties such as Junction 8, Plaza Singapore and Bugis Junction have all registered NPI CAGR of more than 5% over the past two years. In terms of rental rates, CMT also registered positive rental reversions of 9.3%, 2.3% & 6.5% in FY2008, FY2009 & FY2010 respectively. Shopper traffic remains strong at around 200-230m per annum. CMT malls are strategically located in catchment areas (with an established or growing population) and well connected to public transportation systems. Going forward, with the enhancements works at Jcube & the Atrium@Orchard in focus, we are confident that the REIT manager will continue to exploit good value from its assets for unitholders.

Valuation. CMT’s share price has fallen 6.7% YTD. It is presently trading at a PBR of 1.17x PBR, versus its historical PBR of 1.35x since listing. We think the discount is unwarranted, considering CMT’s track record of impeccable property selection and operational management. We upgrade CMT to a BUY rating on valuation grounds, with an increased RNAV-derived fair value of S$1.98.

CapitaMall Trust offers $200m of retail bonds

Interest payment of 2% per annum for 2-year bonds

CAPITAMALL Trust (CMT) is offering up to $200 million in retail bonds, as part of a $2.5 billion retail bond programme announced yesterday.

The $200 million bond issue will consist of a $50 million public tranche, which will be made available by way of electronic application, and a $150 million placement tranche for institutional and other investors.

Both tranches open for applications at 9am today and will be closed at noon on Feb 23. The public can apply through the ATMs of DBS Bank, POSB, OCBC Bank and UOB Bank and its subsidiary Far Eastern Bank, and through DBS Bank’s Internet banking website.

The minimum investment amount is $2,000 for subscriptions under the public offer, with incremental multiples of $1,000.

The issue price of the 2 per cent bonds, due 2013, will be $1 per $1 in principal amount, ie. 100 per cent of the principal amount of the bonds.

CMT, whose portfolio includes Tampines Mall, Funan DigitaLife Mall, Bugis Junction, Rivervale Mall and Plaza Singapura, estimates the net proceeds of the bond issue at $197.9 million, which it says it will use to partially refinance its existing borrowings, fund its investments, on-lend to any trust, fund or entity in which it has an interest, finance asset-enhancement works and for general corporate and working capital purposes.

CMT said its manager has the right to cancel the offer if it receives less than $50 million in applications. In the event that the offer is oversubscribed, CapitaMall Trust Management (CMTM) has the option of increasing the issue size up to a maximum of $300 million – in which case, there will be $75 million for the public tranche and $225 million for the placement.

The bonds are expected to be listed on the Singapore Exchange (SGX) on or about Feb 28. Each board lot will be made up of $1,000 in principal amount of bonds.

CMT said it received in-principle approval from SGX for the listing and quotation of the bonds on Feb 10.

DBS Bank is the sole bookrunner and lead manager for the offer.

As for its $2.5 billion retail bond programme, CMT said the bonds under the programme will be issued from time to time by HSBC Institutional Trust Services (Singapore) Limited, in its capacity as trustee of CMT. DBS Bank is the arranger and dealer of the programme.

The bonds may be issued in series or tranches in Singapore dollars, US dollars, Australian dollars, Canadian dollars, euros, Hong Kong dollars, Japanese yen or in other currencies agreed between CMTM and the relevant dealer of the bonds. The bonds may be fixed-rate, floating-rate, hybrid or zero coupon bonds.

CMT units closed trading unchanged at $1.83 yesterday.