First Reit in rights issue of $172.8m

FIRST Real Estate Investment Trust (First Reit) plans to make a renounceable rights issue to raise $172.8 million to acquire two healthcare properties in Indonesia.

A total of 345.66 million new rights units will be offered to existing unit-holders on the basis of five rights units for every four existing units, at 50 cents per unit. The issue price represents a discount of 47.4 per cent to the closing price of 95 cents per unit on Nov 4. First Reit units closed unchanged at 98 cents yesterday.

The 160-bed Mochtar Riady Comprehensive Cancer Centre (MRCCC) is being acquired from Wincatch Ltd and the 75-bed Siloam Hospitals Lippo Cikarang (SHLC), from First Reit sponsor PT Lippo Karawaci. The two properties will cost a total of $205.5 million, with the MRCCC accounting for $170.5 million of this.

The net proceeds from the rights issue will be boosted by a new term loan facility of up to $50 million.

First Reit says that the purchase prices of MRCCC and SHLC represent discounts of 19.7 and 13.8 per cent respectively to the average of the properties’ latest independent valuations. They will boost the value of the Reit’s assets by 74.3 per cent to $603.4 million, and the gross floor area of its portfolio by 58.7 per cent to 132,696 square metres.

Bowsprit Capital Corporation Limited, as manager of First Real Estate Investment Trust (“First REIT”, and as manager of First REIT, the “Manager”), wishes to refer to the 2010 Second Quarter Unaudited Financial Statements & Distribution Announcement of First REIT dated 26 July 2010 stating, among other things, that First REIT has been actively considering acquisition opportunities that are available through its sponsor, PT. Lippo Karawaci Tbk (the “Sponsor”), which has a robust pipeline of healthcare assets in Indonesia.

The Manager wishes to announce that it is currently in discussions with the Sponsor in relation to the acquisition of two healthcare properties located in Indonesia, being Mochtar Riady Comprehensive Cancer Centre and Siloam Hospitals Lippo Cikarang. It is intended that these properties be leased by First REIT to the Sponsor under long term master lease agreements. The terms of the above transactions are currently being negotiated and the transactions would be subject to, among other things, the valuations of the properties, the approval of the relevant regulators, the Audit Committee of the Manager and unitholders of First REIT (“Unitholders”). The Manager is in the midst of evaluating various sources of funding to finance the acquisitions, but would like to state that no firm decision has been taken to proceed with any specific means of funding. The Manager will, in compliance with its obligations under Listing Manual (the Listing Manual”) of Singapore Exchange Securities Trading Limited (the “SGX-ST”), make the relevant announcements on SGXNET once a firm decision has been made on matters which require disclosure pursuant to the Listing Manual.

In the meantime, Unitholders are advised to refrain from taking any action in respect of their units in First REIT (“Units”) which may be prejudicial to their interests, and to exercise caution when dealing with Units.

First Reit posts 1.3% rise in distributable income in Q1 to $5.25m

FIRST Real Estate Investment Trust (First Reit) has posted a 1.3 per cent year-on-year rise in distributable income for its first quarter to $5.25 million, its manager Bowsprit Capital Corporation said yesterday.

Distribution per unit (DPU) for the quarter ended March 31 rose 1.1 per cent to 1.9 cents from 1.88 cents a year earlier.

Using an annualised DPU of 7.71 cents, distribution yield for the quarter is 8.9 per cent based on the Reit’s closing price of 86.5 cents on April 21. First Reit will close its books at the end of the trading day on May 3 and pay out the distribution entitled to unitholders on May 27.

Its gross revenue increased 0.6 per cent to $7.5 million, while net property income inched up by 0.3 per cent to $7.34 million from the year-ago period.

Bowsprit Capital said that the marginal increase in gross revenue resulted from the deferment of rental income from its Adam Road Hospital property, which is undergoing redevelopment for a cancer centre under the name Pacific Cancer Centre @ Adam Road. This partly offset the higher rental income that was received from First Reit’s Indonesia properties.

Including the deferred rental income, the Reit’s gross revenue would have increased by 4.6 per cent to $7.7 million, said Bowsprit in a statement.

Late last month, Bowsprit said that it will expand its investment policy to include, among other things, medical clinics, pharmacies, laboratories and diagnostic facilities. It will also include real estate and real estate-related assets that are used in areas like healthcare research, education, lifestyle and wellness management, manufacture, drugs and other healthcare goods and devices. Its current investment policy is to own and invest in real estate and real estate-related assets in Asia that are primarily used for healthcare and healthcare-related purposes.

The expanded policy will come into play from May 2.

Said Bowsprit’s chief executive Ronnie Tan on the expanded investment policy: ‘The broader mandate will enable us to invest in a wider range of income-producing assets within the healthcare sector. The increased spread and diversity will enable us to improve the stability of returns to First Reit’s unitholders.’

On top of the expansion of its investment policy, Bowsprit is looking to create more value-add for unitholders by making more investments in Indonesia.

‘We also look forward to more investment opportunities from our sponsor, Lippo Karawaci, which has a pipeline of healthcare assets in Indonesia. Some of these may prove to be suitable and yield-accretive acquisitions for First Reit,’ said Dr Tan.

He added that First Reit is unlikely to jump into China even though it is a market that offers vast opportunities.

‘China is another market that offers much potential. But presently it looks like any healthcare asset acquisition there will require more evaluation and restructuring work for it to be able to meet First Reit’s criteria.’

First Reit’s current portfolio is made up of eight properties located in Indonesia and Singapore. In Indonesia, it has three hospitals under the Siloam Group name and a hotel. Its Singapore properties are made up of three nursing homes and the Pacific Cancer Center @ Adam Road, which will be completed by the middle of next year.

First Reit will keep to its payout policy of 100 per cent of distributable income for FY2010.

Yesterday, First Reit shares rose 0.6 per cent, or half a cent, to 87 cents.

First Reit Q4 distributable income down 0.6%

FIRST Real Estate Investment Trust (First Reit), Singapore’s first healthcare real estate investment trust, posted a distributable income of $5.3 million for the fourth quarter ended Dec 31, 2009, down 0.6 per cent from a year ago, its manager Bowsprit Capital Corporation reported yesterday.

Distribution per unit (DPU) for Q4 2009 was one per cent lower at 1.92 cents. Based on its closing price of 86 cents on Jan 20, 2010 and the annualised DPU of 7.62 cents, First Reit said that it has a distribution yield of 8.86 per cent.

Gross revenue and net property income inched up 1.4 per cent and 1.2 per cent to $7.7 million and $7.6 million, respectively.

On a full-year basis, distributable income increased 0.6 per cent to $21 million on the back of a 0.7 per cent rise in gross revenue to $30.2 million.

‘The recent global recession has demonstrated the resilience of the healthcare business, particularly in Asia which continues to perform well,’ Bowsprit said. First Reit’s portfolio consists of eight properties located in Indonesia and Singapore.

‘We are heartened that our hospitals in Indonesia have continued to perform well despite the global financial crisis last year. The variable rental component, in addition to the fixed annual rental escalation, will mean higher revenue to be generated by our Indonesian assets for FY2010,’ said Ronnie Tan, Bowsprit’s chief executive officer.

In Indonesia, First Reit’s Siloam Group of hospitals has witnessed robust growth in demand for services and higher occupancy, it said.

In Singapore, where First Reit owns three nursing homes, the group reported that prospects for private nursing care are bright in view of a steadily aging population and the government’s recent push to boost and raise awareness of palliative care services. ‘All these factors will help to underscore the current and future demand for quality nursing homes and eldercare facilities for short and long-term convalescent, respite and rehabilitative care’.

The Reit will continue to look at ways to enhance its nursing homes in Singapore. Plans are being proposed for extension works at the Lentor Residence. First Reit has also commenced comprehensive asset enhancement works for its Adam Road Hospital since November last year with completion targeted for mid-2011.

The cost of asset enhancement works, estimated at $18.6 million, will be funded through debt, and will raise First Reit’s gearing from 15.5 per cent as at Dec 31, 2009 to just below 20 per cent upon completion – which will still be lower than the regulatory limit of 35 per cent.

‘Our tight capital management and low gearing, coupled with the fact there is no refinancing requirement until 2012, have provided First Reit with ample headroom to pursue acquisition opportunities and carry out further asset enhancement works to provide best-in-class service for our patients. With improving market conditions, we are currently exploring acquisition opportunities with our sponsor, PT Lippo Karawaci Tbk and other third parties to expand our portfolio of yield accretive properties and raise our overall asset base,’ said Dr Tan.

As at Dec 26, 2009, First Reit’s eight properties were revalued at $340.9 million, representing an increase of $16 million over book value as at end December 2008.

First Reit will maintain a payout policy of 100 per cent of distributable income for FY2010.

The Reit last traded at 86 cents.

ACQUISITION OF PRIVATE LOT A0439900 TUAS VIEW LANE – TERMINATION OF OPTION AGREEMENT

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