Category: MP REIT
MP REIT – SGX
Macquarie Pacific Star Prime REIT Management Limited (“the Manager”), as manager of Macquarie Prime Real Estate Investment Trust (“MP REIT”), has been informed by Futuregement K.K. (“Futuregement”), the local asset manager of one of the properties in MP REIT’s Japan portfolio, that its parent company F.L.E.G. International Co., Ltd. (“FLEG”) has filed a petition for commencement of civil rehabilitation with the Tokyo District Court on 18 December 2008. Future Revolution K.K. (“Future Revolution”), another wholly owned subsidiary of FLEG, is the master tenant and local property manager of MP REIT’s seven Tokyo properties. Both Futuregement and Future Revolution have advised that this will not have any direct impact on their business operations.
As at 30 September 2008, MP REIT’s Japan portfolio of seven properties enjoyed 100% occupancy except for Roppongi Primo (86%) and Daikanyama (88%). The portfolio contributed 7.0% (S$6.6 million) and 8.2% (S$5.7 million) to MP REIT’s gross revenue and net property income respectively for the nine months ended 30 September 2008.
Future Revolution and its related entities directly occupy 19,162 sq ft of NLA (33.3% of Japanese portfolio NLA) while the remainder of the Japan portfolio’s NLA is occupied by end tenants that are not related to Future Revolution (or its related entities). At this juncture, Future Revolution and its related entities are current on their rental obligation. In the event of rent arrears, MP REIT may draw on security deposits provided for the properties, amounting to approximately six months of rent for each property to offset any potential negative impact on MP REIT’s financial results in the near term.
The properties are all relatively new, ranging from 1 to 4 years old. They are located in prime Tokyo areas of Roppongi, Aoyama, Jingumae, Ebisu, Daikanyama and Nakameguro and are all within five minutes’ walk from the nearest sub-way station. Subject to prevailing market conditions, the prime locations of the assets should be advantageous to re-letting should there be a need.
The Manager is in close consultation with its legal advisors, to assess the potential impact of FLEG’s filing on Future Revolution’s and Futuregement’s ability to continue to meet their obligations in relation to MP REIT’s portfolio of Japan properties. The Manager will also look into the possibility of replacing Future Revolution and Futuregement in their respective roles if necessary.
The Manager will closely monitor the situation and will take necessary actions to mitigate MP REIT’s risk exposure.
MP REIT – BT
Reit sponsors and their lucrative exit strategies
MACQUARIE Group, which on Tuesday said it would sell its entire stake in Macquarie Prime Reit and the Reit’s manager to Malaysia’s YTL Corporation for $285 million, is certainly making a neat exit from its investment. However, the interests of minority shareholders, some of whom were waiting for a similar offer for their units, have not been as well served.
When the real estate investment trust (Reit) announced a strategic review in February, the management said it would sponsor the review with the specific objective of enhancing value for all unitholders. ‘The review will consider both corporate and asset-level strategies, including the potential to provide unitholders with a proposal to acquire 100 per cent of (the Reit’s) units,’ management said then.
On Tuesday, Macquarie qualified that, while the review considered the potential to provide unitholders with a proposal to acquire 100 per cent of units, ‘no firm offer was received in the current challenging capital markets environment’.
Having failed to find a buyer for all the units in the Reit, Macquarie decided to sell just its 26 per cent stake in the Reit as well as its 50 per cent interest in the Reit’s manager. The bank wants to redeploy capital in new growth areas. But the deal sells other unitholders – who could have been waiting for a general offer since the February announcement – short.
It is debatable whether Macquarie could have got an offer for all the units in the Reit if it had been willing to accept a much lower price. Some unitholders BT spoke to, at least, are convinced that the bank could have. YTL is paying 82 cents a unit for 247.1 million shares in the Reit. The price is a 52 per cent premium over the last traded price of 54 cents last Friday, the last day of trading before the deal was announced on Tuesday.
The sale has also resulted in a change of sponsor and a fundamental change in terms of strategy and expertise. This should also have been an incentive for management to obtain the same terms for all the unitholders.
YTL’s managing director Francis Yeoh has said that Macquarie Prime will be rebranded as Starhill Global Reit and will be YTL’s main vehicle for acquiring prime retail space in Asia and the West. The YTL group also controls Bursa Malaysia-listed Starhill Reit, the country’s largest Reit with four properties in Kuala Lumpur worth about US$430 million in all. Mr Yeoh has not ruled out the merger of the two Reits – which could change the profile of Macquarie Prime Reit, which currently owns $2.2 billion of retail and office properties in Singapore, China and Japan.
The deal is not the first such transaction this year. In July, Frasers Centrepoint purchased Allco Finance’s 17.7 per cent stake in the then-Allco Commercial Trust (now Frasers Commercial Trust) at a 17 per cent premium to the last traded price – also bringing about a change of sponsor. But the difference between that deal and the Macquarie- YTL deal is that in the case of the latter, there was an implication that a proposal to acquire 100 per cent of the Reit’s units could be forthcoming. A statement between February and October to the effect that no offer for 100 per cent of the units was likely and that Macquarie was now looking to sell its own stake could have avoided this mix-up.
Taking a wider view, there also appears to be a flaw in Singapore’s Reit structure, which allows sponsors to charge high management fees for running the Reit and then obtain superior terms should they decide to exit their investments. Unitholders, who could have bought into a Reit because of the sponsor’s brand name and pipeline, are then left holding a slightly different product. Perhaps there should be a moratorium of several years for sponsors before they can exit the Reit they promoted in the first place.
MP REIT – Nomura
3Q08: in line with expectations
MMP’s 9M08 results were broadly in line with expectations, with reported DPU of S¢5.32/unit (up 18.0% y-y) representing 77.1% of our full-year forecast. Still, the deteriorating macro outlook (we have lowered our Singapore GDP forecast for 2009F to 1.3%, from 3.6% previously) amid higher retail supply likely calls for a review of our rental forecasts and yield assumptions with a negative bias. This will likely hurt our core net asset valuation of S$1.27/unit.
REITs – BT
Reit shares up on Macquarie deal
Shares of Singapore real estate investment trusts (Reits) rose yesterday, helped by improved sentiment after Malaysia’s YTL Corp bought a 26 per cent stake in Macquarie Prime Reit at a more-than-50-per cent premium.
‘YTL’s investment indicates there are investors who are confident in the longer-term prospects of Singapore property,’ Goldman Sachs said in a report. ‘We view this development as positive for Macquarie Prime Reit and for the Singapore Reit sector.’
CapitaCommercial Trust closed trading at 89 cents, up 1.1 per cent after an intra-day high of $1.05, while CapitaMall Trust hit a high of $1.84 before easing 1.8 per cent to $1.62. Macquarie Prime too surged 9.3 per cent before closing 1.9 per cent up at 55 cents.
YTL, a property and infrastructure conglomerate, said on Tuesday it will buy 26 per cent of Macquarie Prime and 50 per cent of the Reit’s management firm for $285 million. The price of $0.82 a unit represents a 52 per cent premium to the Reit’s last traded price and a 49 per cent discount to book value. — Reuters
MP REIT – BT
MP Reit’s DPU up 15.6%
Its rental income remains strong in Q3 despite challenging market
MACQUARIE Pacific Star, the manager of MP Reit, said yesterday that the trust’s third-quarter distributable income was $17.2 million.
Distribution per unit (DPU) for the period July 1 to Sept 30 was 1.78 cents, 15.6 per cent higher than 1.54 cents in the previous corresponding period. On an annualised basis, the latest distribution represents a yield of 8.58 per cent.
Gross revenue for MP Reit was $32.6 million, or 24.8 per cent higher than the $26.1 million in the corresponding quarter a year ago. This was driven mainly by higher rents achieved from renewals, new leases and revenue from the overseas properties. Net property income was higher at $23.6 million, an increase of 21.7 per cent from a year earlier.
Stephen Girdis, chairman of Macquarie Pacific Star, said that rental income remained strong in Q3 ‘despite the current challenging market’.
Franklin Heng, Macquarie Pacific Star’s CEO, added: ‘The supply of new office space in Orchard Road in the next few years is limited and we expect to still reap some rent reversions from office leases expiring in the next year.’
Commenting on Tuesday’s announcement that YTL Corporation has entered into a sale-and-purchase agreement to acquire Macquarie Group’s 26 per cent stake in MP Reit and a 50 per cent stake in the holding company of Macquarie Pacific Star, the officials said that in the challenging environment and in the midst of a strategic review, no firm offer to acquire 100 per cent of MP Reit’s units or its investments was received.
‘In light of the above, MP Reit’s strategic review has been concluded and Macquarie Pacific Star looks forward to working with the new sponsor, YTL Corp, in the interests of unitholders, in assessing and implementing the new strategic initiatives available to MP Reit,’ the trust manager said.
MP Reit refinanced $220 million through a club deal with three foreign banks in August 2008. As at Sept 30, MP Reit’s gearing level was 28.9 per cent, and 89.4 per cent of its borrowings were fixed.
It ended trading yesterday up one cent to $0.55.