CLT – BT
Cache Logistics Trust IPO to raise $417m
Reit’s cornerstone investors are JF Asset Mgt and Morgan Stanley Investment Mgt
CACHE Logistics Trust (CLT), the first real estate investment trust (Reit) heading for a Singapore listing since the global financial crisis broke, aims to raise $417.2 million in gross proceeds from its listing.
CLT will offer 474.1 million units at 88 cents each – a price that is at the top end of the 84-88 cent range indicated earlier.
Of these units, 433.1 million will be placed out and 41 million will be available to the public. The public offer will open today and close on April 8.
According to Reit manager ARA-CWT Trust Management (Cache), investors at roadshows have responded well to the initial public offering.
‘I think it will be very successful,’ said ARA Asset Management CEO John Lim at a briefing yesterday. ARA has a 60 per cent stake in the manager while logistics firm and Reit sponsor CWT Ltd owns the other 40 per cent.
CLT has attracted two cornerstone investors – JF Asset Management holding 41 million units and Morgan Stanley Investment Management Company holding 15.9 million units.
After the IPO is complete, 632.2 million units will be in issue. Trading of the units is expected to start on April 12.
Based on the offer price of 88 cents, CLT is projecting a distribution yield of 8.7 per cent for the financial year ending Dec 31, 2010, and a yield of 8.82 per cent for 2011.
CLT’s initial portfolio will comprise six logistics properties in Singapore with a total gross floor area (GFA) of 3.9 million sq ft. Growth is on the cards – the Reit will focus on expanding locally in the near term before looking at acquisitions in foreign markets such as Greater China and Malaysia.
‘We need to make certain that we have a good base…and we also want to make sure that the timing is right to enter (overseas) markets,’ said CEO of CLT’s manager, Daniel Cerf.
Besides, CLT has a right of first refusal from CWT and its substantial shareholder C&P, on 13 properties with a GFA of 2.9 million sq ft. ‘You have to eat whatever you have on your plate first,’ Mr Lim quipped.
CLT will start off with an aggregate leverage of 25.9 per cent – one of the lowest levels in the Reit industry. According to Mr Cerf, leverage that is 30 per cent or less would be optimal, though the level may change as CLT acquires properties.
CLT – CNA
Cache Logistics Trust expects to raise S$417.2m from its IPO
Cache Logistics Trust expects to raise some S$417 million from its initial public offering.
The IPO, launched on Thursday, is the first logistics real estate investment trust to be listed in more than two years.
CLT is a joint real estate investment unit of CWT and ARA Asset Management.
It's offering more than 470 million units at 88 cents each.
The IPO is priced at the higher end of the 84 cents to 88 cents indicative range but Mr John Lim, chief executive officer of ARA Asset Management said that he remains confident that it will still attract "overwhelming demand."
There are currently six properties in CLT's portfolio.
They are located near Changi Airport, PSA Corp's terminals and Jurong Port.
With a total gross floor area of 3.9 million square feet, the properties include ramp-up warehouses – a multi-storey feature that CLT's chief executive officer Daniel Cerf believes will maximise plot ratio and boost its resilience as a logistics REIT.
Earlier this year, CWT sold two properties in Singapore to CLT for S$445 million, with the REIT funding the purchase through a combination of shares and cash.
CLT plans to use its IPO proceeds to fund new properties and working income.
The units are expected to start trading on the Singapore Exchange mainboard on April 12.
Macquarie Capital, Standard Chartered and DBS Bank are underwriters and joint global co-ordinators of the IPO. – CNA/vm
Link : IPO Prospectus
CMT – OCBC
Issues US$500m 5-year fixed rate notes
Issues US$500m fixed rate notes. Yesterday, CapitaMall Trust (CMT) announced that it is planning to issue US$500m 5-year fixed rate notes bearing interest rate of 4.321% per annum (payable half-yearly in arrears). The notes are issued under the US$2b Euro-Medium Term Note Programme that was established earlier this week. At the same time, CMT had also entered into swap transactions to swap the US dollar proceeds of US$500m into Singapore dollar proceeds of S$699.5m (exchange rate: S$1.399 to US$1) at a S$ fixed interest rate of 3.794% per annum. Proceeds from the issue will be used to refinance existing borrowings, finance investments, asset enhancement works and for general working capital.
Bigger-than-expected issue, but at competitive financing costs. This fixed rate notes issue is the largest done by CMT in recent years and the size of the issue is bigger than what we have hoped for. In our view, separate notes issues with different loan tenures would have reduced the amount of borrowings maturing in 2015 and thus, make refinancing more manageable going forward. With the new issue, CMT will have borrowings of S$799.5m maturing in 2015, which is 29% of its total borrowings maturing between 2011 and 2017. Nevertheless, we think that the size and pricing of the issue are indicators of strong demand and investor confidence in CMT. With the currency swap, CMT will be paying a lower interest rate of 3.794% per annum, which is reasonable in comparison to the financing costs of its recent medium term notes and also within our expectations.
Sufficient cash for Clarke Quay acquisition and AEIs. For the year to date, CMT has raised S$899.5m though its medium term note programs and with its cash holding of S$350.8m, its current liquidity position is more than sufficient to meet the refinancing of its S$440m of borrowings due in 1H10. We expect CMT to use the remaining cash to finance the acquisition of Clarke Quay (S$268m) and the ongoing asset enhancement initiatives (AEI) at Jurong Entertainment Centre (Budgeted capex: S$200.32m) and Raffles City Basement 2 Link (Budgeted capex: S$33.23m).
Maintain BUY. We are not making any changes to our estimates and we maintain our fair value of S$1.93 on CMT. Total return of 14.6% is attractive, taking into consideration the defensiveness of retail mall assets, its strong management team and visible growth pipeline from pending acquisition and AEIs. We maintain our BUY rating on CMT.
Office REITs – OCBC
Comparing the four office REITs
Vulnerable to negative rent reversions in FY10-11. Many of the leases secured on high rents during the hot 2007-2008 period will be expiring in 2010 and 2011. It is very likely that these leases will be renewed or replaced at much lower levels. This, in turn, will have an effect on revenue and distributable income, in our view. Among the four office REITs we discuss here, Frasers Commercial Trust [FCOT, NOT RATED] has the lowest percentage of NLA expiring (16.9%) in FY10 and FY11. K-REIT Asia [K-REIT, NR] follows with 32.2% of its NLA expiring in FY10-11. CapitaCommercial Trust (CCT) and Suntec REIT (Suntec) will see the most expiring office leases: 52.3% of CCT's gross rental income derived from office space will be up for renewal in FY10-11. Meanwhile, leases on 41.8% of Suntec's office NLA expire in FY10-11. While REITs may be hit by the appetite for newer buildings, we believe tenants will still favor quality assets such as Six Battery Road.
Expect significant re-financing activity. We estimate that S$2.4b of office REIT loans mature in both 2011 and 2012. The bulk of the maturities are for Suntec and CCT loans. We believe the REITs will tap on secured loan facilities, convertible bond issues and medium-term note programs to meet their re-financing needs. Some of the REITs could potentially test the CMBS market but in small amounts. We expect the REITs to start the re-financing process early to take advantage of the easing credit market, the low interest rate environment, and to assuage any remnant investor jitters. Quality sponsors and quality assets will continue to be crucial to securing competitive pricing.
Valuation. Office REITs trade at an average forward yield of 6.9%. They trade at an average price-to-book of 0.71x, which compares favorably to the broader S-REIT sector. We have BUY ratings on both Suntec and CCT as we feel their current valuations more than reflect the challenges facing the office sector. Suntec is one of our top picks for the broader S-REIT sector due to its exposure to the revitalizing Marina Bay area and its oft-forgotten retail portfolio (two Circle Line MRT stations open at Suntec City next month). In addition, we feel that market attitudes towards office REITs may start turning due to increased leasing activity and the supply management tactics taken by office landlords including CCT. Investors who want a purer exposure to the office sector may prefer CCT to Suntec.
Singapore Retail REITS – Daiwa
The laggard stands out
Summary
- The recovery in retail sales has just started to gain pace, while the rental decline from 2Q08 might soon be over, but we believe expectations of a gradual retail-sector recovery have already been discounted fully.
- We have not changed our preference for using the Daiwa RNG valuation method (a finite-life Gordon Growth model) as our primary tool for valuing Singapore real-estate investment trusts (S-REITs), but we have modified this valuation approach slightly to improve the comparability of its results.
- In contrast to its peers, which we see as fully-valued, we believe Starhill Global is a standout on valuations and distribution-per-unit (DPU) yield, even if we ignore the proposed acquisitions in Malaysia. We maintain our 2 (Outperform) rating for Starhill Global, with an RNG valuation-derived six-month target price of S$0.65.
- We have downgraded our rating for Frasers Centrepoint Trust (FCT) to 3 (Hold) from 2 (Outperform), after lowering our RNG valuation-derived six-month target price to S$1.44 (from S$1.54).
- We maintain our 3 (Hold) rating for CapitaMall Trust (CapitaMall), which looks fully-valued (in our opinion) for a dominant market leader that faces low single-digit-percentage DPU growth (based on our revised DPU forecasts) for FY10 and FY11.