Category: FCOT
AllCo – SGX
RIGHTS ISSUE PRICE AND UNDERWRITING PRICE
Further to the announcements made by Allco REIT on 25 May 2007 and 26 May 2007, the Board of Directors of Allco (Singapore) Limited, as manager of Allco REIT (“Manager”), is pleased to announce that the Rights Issue Price per Rights Unit is S$1.04. Applications for Excess Rights Units by Eligible Unitholders will be made at the Underwriting Price of S$1.14. Any Remaining Rights Units will be underwritten by the Sole Underwriter at the Underwriting Price.
Further details will be set out in the circular (which includes the Offer Information Statement) to be lodged with the MAS and despatched to Unitholders in due course.
Source : SGX
AllCo – SGX
COMPLETION OF ACQUISITION OF THE CENTRELINK PROPERTY
Singapore, 18 June 2007 – Further to the announcements made by Allco Commercial Real Estate Investment Trust (“Allco REIT”) on 25 June 2007 and 11 June 2007 in relation to the approval of Unitholders at the Extraordinary General Meeting (“EGM”) of the proposed acquisition of a 50.0% indirect interest in the Centrelink Property, the Board of Directors of Allco (Singapore) Limited, as Manager of Allco REIT, is pleased to announce that Allco REIT has today successfully completed the acquisition of a 50.0% indirect interest in the Centrelink Property for A$108.75 million (S$136.5 million 1). Record Realty, a property trust listed on the Australian Securities Exchange (ASX: RRT), will hold the remaining 50.0% indirect interest in the Centrelink Property, which it has acquired for A$109 million.
The purchase consideration is based on the average of two independent valuations2 of the Centrelink Property from CB Richard Ellis Pty Limited and Colliers International Consultancy and Valuation Pty Limited. Cash payment of the purchase consideration will be made upon the close of the Rights Issue which was approved by Unitholders at the EGM on 11 June 2007.
The Centrelink Property is a new contemporary designed, five storey “Grade A” office complex with a net lettable area of approximately 430,556 sq ft. It is strategically located within the core of the Tuggeranong Town Centre, one of four town centres within the city of Canberra, Australia’s capital city and the location of the Federal Parliament House.
The Centrelink Property will be fully leased by the Centrelink National Support Office (a statutory agency of the Australian Federal Government), for an initial period of 18 years, expected to be as and from 4 July 2007. The rental structure incorporates a rental escalation of 3.0% per annum for each year of the lease.
1 Based on an exchange rate of S$1.00 = A$0.7964, being the rate at which Allco REIT has entered into a foreign exchange derivative instrument to purchase the Centrelink Property.
Source : SGX
SREITS – OCBC
Surprise rule change on REIT M&A. In our 2007 strategy report dated 11 Dec 2006 “M&A theme a strong possibility in 2007/08”, we had articulated that M&A could be another avenue for growth. This scenario is now coming closer to reality with the Securities Industry Council’s (SIC) surprise announcement on Friday that it will extend the Singapore Code of Takeover & Mergers to REITs. This move is significant as it means that there is now clarity on M&A rules for S-REITs. Now anyone who acquires 30% or more of any REIT must make a general offer (GO) for the remaining units. Furthermore, anyone who owns 30%-50% of any REIT and acquires a further 1% of the units must also make a GO for the rest of the units.
Market getting more competitive. The key issue with the high-beta REITs such as CCT, MLT, CMT, ART, AREIT is the ability of the managers to meet market growth expectation. This is particularly so in a property up-cycle where fewer properties are available to be acquired. Some are venturing overseas, while others remain domestic focus (AREIT, Cambridge). Another avenue for asset size growth is via own development (AREIT, CMT), but this is a riskier strategy and is constrained by REIT guidelines. However with the SIC rule change on M&A, the REIT manager has another avenue to meet market’s growth expectations
A function of risk appetite. In our opinion, the market has segmented SREITs into two camps, i.e. REITs with high and low growth expectations. The key differentiating factor is the P/B ratio. We see potential for both camps, and the choice for investors for either is a function of their risk appetite. The high-beta REITs are those with high P/B ratio. As the market has already priced in growth, the risks are higher. On the other hand lowbeta REITs, we see minimal downside risks. In fact with them now being eyed as targets for acquisitions, we see a strong upside possibilities.
Potential winners in M&A. We see the likely winners in the new M&A rules to be those trading with higher yield and low price to book relative to their peers in the same sector. We see these REITs to be Allco, Cambridge, Macarthur, MM Prime and First REIT. (Winston Liew)
Office REITs – DBS
All-time high for office property. Office asset values continue to heat up, with transacted prices hitting new highs and now past the last peak, driven by property funds active in asset transactions. With the previous high for office assets set by the sale of 7 floors of Prudential Towers by Straits Steamship Land (Keppel Land), a record of S$2,200 psf set in 1996, office capital values have now hit an all-time high with latest sale of 1 Finlayson Green by Hong Leong to UK-based property fund Develica at unit price of S$2,650 psf (S$2,470 assuming full efficiency). This transaction is hot on the heels of the recent sale of Parakou Building at Robinson Road for S$2,013 psf.
Asset revaluation across office REITs set to continue. Along with the latest year-end revaluation, the Singapore office portfolio for S-REITs has been revalued upwards (CCT +10%, Suntec +30%, K-REIT +7.3%, Allco +7%). We expect asset reflation for office S-REITs to continue, with growth in average rents to boost office asset appraisals.
Boom and bane for office Reits. Office REITs are direct beneficiaries of asset reflation from potential upward revaluation based on market comparison of market transactions. However, with the current bullish outlook for Singapore office rentals, price expectations of asset owners have also escalated, compressing physical yields to lower levels (below 3% for the case of the Temasek Tower acquisition by MGPA). Yield accretiveness of acquisitions are reduced, and coupled with strong competition for assets from private property funds with more flexibility and less stringent regulations on investment and access to funds, S-REITs in our view are currently priced out of the market for commercial assets.
Overseas expansion would be a natural course to drive acquisition growth. K-REIT stands out in asset reflation scenario. While we prefer the DCF approach in valuing S-REITs because it takes into account the intrinsic cashflows generation ability of the underlying assets, RNAV approach could also possibly breach the gap, as it factors in asset pricing by market players acquiring assets at capital values pricing in future rental growth prospects. In an asset reflation scenario, K-REIT stands out with potential upside of 93% versus CCT (-2.7%), Suntec (+7.3%) and Allco (+48%). We have BUY recommendation for K-REIT with target price of S$3.70 per unit based on DCF estimates.
Allco – ML
ALLCO, ml remains a BUY with target price $1.93