Category: FirstREIT
FirstREIT – BT
First Reit goes on acquisition trail
It aims to boost its asset portfolio to $500m by 2009
FOLLOWING the recent announcement by First Real Estate Investment Trust that its distributable income of $4.5 million for the second quarter exceeded forecasts by 3.8 per cent, the Reit is embarking on an acquisition trail to raise asset portfolio to $500 million by 2009.
Singapore’s first healthcare real estate investment trust recently completed its acquisition of Adam Road Hospital for $14.9 million.
With its first hospital acquisition in Singapore, earnings from hospitals will contribute further to First Reit’s revenues.
In the second quarter ended June 30, First Reit reported that net property income rose 8.6 per cent to $6.5 million on the back of maiden contributions from its three recently acquired nursing homes in Singapore.
‘We believe that our yield of 8.19 per cent continues to be one of the highest among Singapore Reits. With a clear focus in Asia’s booming healthcare sector, First Reit offers investors a unique and growing asset class which holds immense potential for yield and capital growth,’ said Bowsprit Capital Corporation chief executive Ronnie Tan, who manages the Reit.
Since its listing in December, First Reit has expanded its asset base by about 20 per cent and now holds eight healthcare assets totalling $308 million. It has four assets in Indonesia, three of which are hospitals. In Singapore it has three nursing homes and a hospital.
Dr Tan said: ‘We will continue to be fairly aggressive in looking for assets, not only in Indonesia and Singapore but we are very keen to look at Chinese assets. In the near term, China will present us with very good opportunities and we hope that in three to six months we will be able to firm up positions in China.’
In Singapore, First Reit will continue to look for further nursing homes. Dr Tan said they provide a stable business in the long term, due to Singapore’s ageing population.
The Singapore Reit is also exploring potential acquisitions with its Indonesian sponsor Lippo Karawaci. Possible projects include Siloam Hospitals Lippo Cikarang and Siloam Hospital Semanggi, which will house Indonesia’s first private cancer treatment centre.
To finance its acquisitions, First Reit has a $90 million term loan facility with OCBC. Including the latest acquisition of Adam Road Hospital, First Reit’s gearing stands at 16.5 per cent.
First Reit’s distribution per unit for the second quarter was 1.65 cents – 3.8 per cent above forecast. The Reit’s shares closed at 82 cents yesterday, up 1.2 per cent.
First REIT – UOBKH
2Q07: Results Slightly Ahead of Forecast, More Plans Revealed
Results slightly ahead of forecast. First REIT’s Q2 results came in slightly better than its earlier forecasts. A S$6.50m net property income was achieved (8.6% ahead of its forecast), translating into a DPU of 1.65 Scts (6.59 Scts on an annualised basis), or 3.8% higher than its forecast. The increase in revenue and distributable income was attributed to maiden contributions from its three recent acquisitions (Lengkok Nursing Home, Senja Nursing Home and Lentor Nursing Home).
Asset enhancements to Adam Road Hospital. Besides the recent three nursing homes acquisitions, First REIT has also just completed its fourth acquisition of Adam Road Hospital. It intends to undergo major asset enhancements to Adam Road Hospital and will convert it from a primarily psychiatric hospital to one which provides mainly general hospital services such as day-care surgery and dental services for higher profitability. Post enhancements, psychiatric services will only contribute a small portion to its revenue.
Pipeline of hospitals identified for steady acquisition trail. With the addition of four new properties, total portfolio asset size of First REIT currently stands at about S$308m. We believe it is on track to meet management’s target portfolio of S$500m by 2009. It is already in negotiations to acquire an asset in China, and also seriously looking for opportunities in key cities (Beijing, Shanghai and Shenzhen) of China, Malaysia, Vietnam, Philippines, and Thailand. Besides acquiring assets from other vendors in the region, First REIT is also exploring potential asset injections from its sponsor, Lippo Karawaci. Potential pipeline includes Siloam Hospital Lippo Cikarang, Siloam Hospital Semanggi, which will house Indonesia’s first private cancer treatment centre (due completion in Dec 08), and also any potentially upcoming hospitals from expansion plans by Lippo Karawaci at Siloam Hospitals West Jakarta and Siloam Hospitals Surabaya.
Higher investors’ interests as more plans unravel. First REIT has been trading with low liquidity since launch, with a yield of 8.19% (based on 20th July 07’s closing price). We expect liquidity to improve as it unravels more plans which will generate investors’ interest.
First REIT – SGX
First REIT’s 2Q07 distributable income up 3.8% to $4.5M as healthcare portfolio grows
Maiden contribution from three recently acquired nursing homes
2Q07 DPU of 1.65 Singapore cents represents an annualised distribution yield of 8.19%
Successfully completes fourth acquisition this year – Adam Road Hospital
SINGAPORE – 23 July 2007 – Bowsprit Capital Corporation (the “Manager”), the manager of First Real Estate Investment Trust (“First REIT”), Singapore’s first healthcare real estate investment trust, today announced that First REIT’s distributable income of S$4.5 million for the second quarter of FY2007 ended 30 June 2007 exceeded forecast by 3.8%.
At the same time, First REIT is also pleased to announce that it has successfully completed the acquisition of Adam Road Hospital for a purchase consideration of S$14.9 million. This represents First REIT’s fourth completed acquisition since its listing in December 2006 and clearly demonstrates its commitment to expand its asset portfolio and strengthen property income.
In the second quarter of FY2007, First REIT’s net property income rose 8.6% to S$6.5 million as maiden contributions from its three recently-acquired nursing homes in Lengkok, Senja and Lentor kicked in. Both the Lengkok and Senja nursing homes were acquired on 11 April 2007, while the acquisition of Lentor nursing home was completed on 8 June 2007.
First REIT’s distribution per Unit (“DPU”) for the second quarter was 3.8% higher than forecast, amounting to 1.65 Singapore cents, representing an annualised yield of 8.19% based on the closing price of S$0.805 per Unit on 20 July 2007.
The Books Closure and Distribution Payment dates are 1 August 2007 and 29 August 2007 respectively.
Commenting on First REIT’s results, Dr Ronnie Tan, Bowsprit’s CEO said, “We believe that our yield of 8.19% continues to be one of the highest among Singapore REITs. With a clear focus in Asia’s booming healthcare sector, First REIT offers investors a unique and growing asset class which holds immense potential for yield and capital growth. We are well on an aggressive acquisition trail and the Management is confident of raising our asset portfolio to S$500 million before 2009.”
Indeed, since its listing in December 2006, First REIT has expanded its asset base by about 20%. It currently has eight healthcare assets totalling S$308.0 million, compared with four assets at S$257.0 million at IPO last year.
Capital Management
To fund its acquisitions, First REIT has in place a clear financing structure with a S$90 million term loan facility with the Oversea-Chinese Banking Corporation. S$51 million of the proceeds have been utilised to date for First REIT’s acquisitions. Including the latest acquisition of Adam Road Hospital, First REIT’s gearing stands at 16.5%.
“Compared with other REITs, our gearing is still relatively low and this gives us headroom to undertake more accretive acquisitions. We are currently in active negotiation with a number of vendors in the region, which we hope will lead to a few additional acquisitions soon,” added Dr Tan
Potential Acquisitions
Besides acquiring assets from other vendors in the region, First REIT is also exploring potential acquisitions with its Sponsor, Lippo Karawaci.
Potential pipeline includes Siloam Hospitals Lippo Cikarang, and a 29-storey, 210-bed specialist hospital, called Siloam Hospital Semanggi, which will house Indonesia’s first private cancer treatment centre with state-of-the-art equipment – the Mochtar Riady Comprehensive Cancer Centre (“MRCCC”). Collectively known as the “Building of Hope”, Siloam Hospital Semanggi and MRCCC is expected to be completed and operational by December 2008.
In addition, according to Lippo Karawaci, expansion plans are underway at Siloam Hospitals West Jakarta and Siloam Hospitals Surabaya. When completed, First REIT has the option of acquiring the expanded real estate under terms of the Master Lease agreement.
“First REIT has the benefit of a regional reputable sponsor that is committed to expanding its healthcare business. With the first right of refusal under terms of the Master Lease agreement, Lippo Karawaci’s growing healthcare facilities form a solid pipeline of potential acquisitions for us, while we continue to explore other acquisition targets in the region,” added Dr Tan.
Barring unforeseen circumstances, First REIT is confident of delivering on its 2007 forecast distribution of 6.51 cents.
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)
FirstREIT – SGX
First REIT acquires 3rd Singapore nursing home (51 Lentor Avenue) for S$12.8 million
- Marks the Group’s 4th acquisition in Singapore
- Expected incremental annualized distribution per unit of 0.067 Singapore cents
SINGAPORE – 1 June 2007 – First Real Estate Investment Trust (“First REIT”), Singapore’s first healthcare real estate investment trust, announced that it has entered into a conditional Option Agreement (“Option Agreement”) for the acquisition and lease of a nursing home at 51 Lentor Avenue (the “Property”) for S$12.8 million.
This latest move follows First REIT’s acquisition of two nursing homes and a hospital in Singapore in January 2007.
The Option Agreement was entered into with the Vendor – Sphere Investment Pte Ltd, which currently owns the four storey custom-built 148-bed nursing home with a land area of 2,485.6 square metres and gross floor area of 2,982.721 square metres. Upon the completion of the acquisition, First REIT will in turn lease the Property to First Lentor Residence Pte Ltd for 10 years at a commencement rental income of S$998,400 per annum, with an option to renew the lease before the expiry. In addition, First REIT will enjoy annual step up rental increases in the subsequent years for up to 10 years.First REIT, which expects the acquisition to be completed by June 2007, estimates that Property will give rise to an incremental annualised distribution per unit (“DPU”) of 0.067 cents.
“This acquisition will represent our third nursing home in Singapore. We will continue to identify acquisition targets for modern and purpose-built nursing homes in Singapore as they provide relatively high yield with stable and high occupancy,” said Dr Ronnie Tan, Chief Executive Officer of Bowsprit Capital Corporation Limited, as manager of First REIT (the “Manager”).
Dr Tan added, “Not only will this acquisition further strengthen our income stream, it will also enlarge First REIT’s asset portfolio, raising it to S$293.1 million once the deal is completed. This will expand our asset base by 14% since our IPO in December 2006. Our investment goal is clear – to grow our asset base to S$500 million within 3 years from the initial public offer, focusing on quality healthcare assets in Asia. Based on the acquisition momentum we have set, and the pipeline of acquisitions which we are currently negotiating, we believe we are on track to achieve our target.”
The acquisition will be fully funded by debt via the proceeds of a S$90 million term loan from Oversea-Chinese Banking Corporation set up on 11 January 2007. Assuming that the acquisition is successfully completed by June 2007, First REIT’s gearing will be raised from the current 7.88% to 11.68% as at 30 June 2007.
“Our gearing after the acquisition will still be relatively low, giving us financing flexibility to undertake more acquisitions that fit in with our strategy. We will continue to look out for quality healthcare assets in different parts of Asia so as to reduce our reliance on any single country or type of tenants,” added Dr Tan.
First REIT believes that it is well positioned to benefit from Asia’s growing healthcare industry, supported by rising life expectancies in the region, increasing consolidation within the Asian healthcare industry, as well as the growing demand for healthcare services. Itremains confident of delivering on its FY2007 forecast distribution of 6.51 cents as indicated in First REIT’s prospectus dated 4 December 2006.
Source : SGX