A-REIT sets record high occupancy rate of 98.7% in 3Q FY2007/08

17 January 2008, Singapore – Ascendas Real Estate Investment Trust (“A-REIT”) has renewed and signed new leases (including expansions) amounting to a total net lettable area of 46,933 sqm for the three months ended 31 December 2007 (the “Period”). These leases represent 6.8% of the net lettable area of its multi-tenanted buildings(1) and an annualised rental income of S$11.1 million for A-REIT.

The overall portfolio occupancy rate increased to a record high of 98.7% as at 31 December 2007 compared to 96.1% a year ago. Occupancy rate for A-REIT’s multi-tenanted buildings has also increased to 97.0% at the end of the Period versus 96.2% as at 30 September 2007. Total new leases (including expansions) for the Period were 16,961 sqm, of which 28.7% was in Business and Science Parks, and 32.8% was in Hi-Tech Industrial properties. The remaining 38.6% was in the other two sectors – Light Industrial & Flatted Factories and Logistics & Distribution Centres.

A-REIT’s portfolio comprises 51% multi-tenanted buildings and 49% sale-and-leaseback properties based on portfolio value.

Tokyo-based real estate fund manager Re-plus Inc is in talks with bankers to list the first Singapore property trust backed by a Japanese sponsor.

Re-plus wants to list a real estate investment trust (Reit) that would include two Chinese office buildings worth at least US$400 million. Situated in Beijing, the buildings are the only overseas assets in Re-plus’s portfolio, which is valued at about 270 billion yen (S$3.4 billion).

According to a banker, The portfolio has not been finalised yet. They are in talks with several banks now, but the trust could come to the market early next year. Re-plus, valued by the market at US$482 million, already manages Re-plus Residential investment, a Reit based on rents collected from its apartments in Tokyo.

Bankers said that Re-plus wants to list its Reit in Singapore because Japanese-listed property trusts are not allowed to own foreign assets. Singapore’s Reit market – the third-largest in the Asia-Pacific after Australia and Japan – has grown to more than US$18 billion, boosted by trusts containing assets ranging from Indonesian hospitals to Chinese shopping malls.

CDL Hospitality Real Estate Investment Trust (CDL H-Reit) has purchased the Novotel Clarke Quay in a deal that prices the 398-room hotel at $219.8 million or about $552,000 per room. The amount comprises a purchase amount of $201 million and assumption of potential liability of about $18.8 million. The hotel site has a remaining lease of about 70 years. For the seller, a Lehman Brothers entity, the divestment represents a doubling of its investment. Lehman bought the hotel, then known as Hotel New Otani, in 2004 for $82 million from a Wuthelam Group-controlled entity and spent a further $19 million renovating it, resulting in an all-in investment of around $101 million. It later appointed French hotel chain Accor to manage the hotel under the four-star Novotel brand. City Developments Ltd’s Londonlisted hotel arm, Millennium & Copthorne Hotels (M&C), has a 39 per cent stake in CDL Hospitality Trusts.

The yield-accretive acquisition of Novotel Clarke Quay will boost CDL Hospitality Trusts’ Singapore hotel room count by around 20 per cent to 2,324, making it Singapore’s biggest hotel owner, in terms of number of rooms. The acquisition will also see the value of the trusts’ properties grow from about $1.1 billion to $1.3 billion. CDL H-Reit will enter a lease agreement appointing the hotel’s incumbent manager Accor SA to manage and operate the hotel under the Novotel flag until end-2020, for a fee that works out to a tad below 10 per cent of the hotel’s gross operating profit. The projected annualised property yield of the hotel for this year is about 5.5 per cent, higher than the 3.9 per cent implied property yield for CDL H-Reit’s current portfolio for the current year.

The acquisition is forecast to boost annualised 2007 distribution per unit (based on Q1 2007 results) by 8.9 per cent, from 7.10 cents to 7.73 cents. Vincent Yeo, CEO of M&C Reit Management Ltd, the manager of CDL H-Reit, said that assuming the acquisition of Novotel Clarke Quay is fully funded by debt, the trusts’ gearing ratio will increase from 35 per cent to 46 per cent. He said that while the trust is on the lookout for more hotel acquisitions in the Asia-Pacific – in countries like China, India, Philippines and Vietnam – Singapore still remains one of his favourite markets because of its growth potential and risk profile.

For Q1 2007, CDL Hospitality Trusts’ Singapore hotels achieved a 25.4 per cent year-on-year increase in revenue per available room (RevPar). ‘Based on the strong performance so far in the second quarter, the industry players expect a much higher year-on-year RevPar growth in Q2. And we expect that to be the same for the hotels in the CDL Hospitality Trusts.’

The acquisition of Novotel Clarke Quay will increase CDL Hospitality Trusts’ exposure to the strong Singapore hotel market, which is expected to benefit from continuing strong growth in visitor arrivals and minimal new hotel room supply this year and next.