CCT – BT
CCT raising up to $250m from convertible bonds
Most of the funds to be used for asset enhancement and debt refinancing
CAPITACOMMERCIAL Trust (CCT) is planning to raise at least $225 million and up to $250 million through a five-year convertible bond issue to be placed with institutional and accredited investors.
The office Reit, which is partly owned by CapitaLand, plans to use most of the funds (75-90 per cent) for ‘asset enhancement and refinancing of existing indebtedness’, CCT said in an SGX announcement late last night. The remaining funds will be used for general working capital.
Credit Suisse has been appointed the sole bookrunner and lead manager for the issue which is expected to close on or around April 21.
The maximum number of new units to be issued upon conversion will not exceed 10 per cent of the 2.81 billion units in issue as at Dec 31, 2009. In line with Rule 887(1)(a) of SGX-ST’s listing manual, no unitholders’ approval is required in this case.
At its full-year results briefing, CCT said that it had no plans to raise equity citing the lack of acquisition plans.
CapitaLand’s shares tanked on the announcement of its $1.1 billion convertible bond issue in August on concerns over share dilution.
In early January, the trust wrote down the value of its investment properties by $327.6 million and unveiled plans to revamp its portfolio. It said that it would sell Robinson Point to a private fund for $203.3 million and look at redeveloping Starhub Centre at Cuppage Road from an office property to a mainly residential one.
It also reported a downward revaluation of its properties from $6.03 billion in May 2009 to $5.7 billion at end-2009. The writedown follows an earlier one in May, where the value of CCT’s portfolio was reduced from $6.71 billion in December 2008.
CCT owns 11 commercial properties in Singapore, including some older properties in the Central Business District (CBD). It is believed that the funds raised could be used to redevelop Starhub Centre as well as possibly resurrect plans to redevelop the Market Street Car Park into an office development which were shelved last year due to the uncertain market outlook.
In May 2009, CCT announced plans to raise $828.3 million in a rights issue as it looked to cut down its gearing.
Prime office rents in the CBD have been falling and an upcoming glut of office supply is seen contributing to further rental erosion with analysts seeing older buildings as being particularly vulnerable. For example, in January, property firm Savills said that it expected a 20-25 per cent fall in Grade A office rents in Singapore this year.
The Grade A office supply here will rise by 47 per cent between 2010 and 2012, with 7.7 million square feet of space being added, Savills added.
CCT shares were suspended yesterday pending the announcement and remained suspended pending pricing of the bonds. On Tuesday, the stock lost one cent to close at $1.13.
CCT – GS
No refinancing risk, implies convertible bond more for acquisitions
News
CCT announced today (17 Mar) the issue of S$225mn of Convertible Bond (CB) due in 2015, with an over-allotment option of S$25mn. This marks CCT's second CB issue following the S$370mn, 2.0% coupon in April 2008; the conversion premium on the issue was 23.9%. Pricing details of today's CB was not available at the time of this report. CCT intends to use 10%-25% of the proceeds for general working capital purposes and the remaining 75%-90% for asset enhancement initiatives (AEI) and debt refinancing. Applying the same premium of its past CB would suggest that the new CB could account for 6%-7% of current shares outstanding, under a full conversion. We estimate 2010 gearing could rise to 36% from 32%.
Analysis
Although bite-sized, we think the proceeds from CB provides financial flexibility and paves the way for long awaited acquisition(s) and/or AEIs to enhance its Office portfolio, allaying market concerns that it is losing its foothold in the Office market with the sale of Robinson Point and potential redevelopment of Starhub Centre to residential. We estimate CCT will have available cash balance of S$600mn for acquisitions post its Robinson Point sale (proceeds of S$203mn) and S$150mn MTN that is due in Mar. Further, we think with CCT's current levels of leverage, the company should be under no refinancing pressure as its S$370mn CB put option is only due in May 2011 and S$520mn CMBS only due in Sep 2011. Positive read-across for the SREIT sector, with CCT's issue following A-REIT's S$300mn issuance of Exchangeable Collateralized Securities on 15 Mar, suggesting an improving debt market that could pave the way for acquisition-led growth.
Implications
We think the CB paves the way for CCT's portfolio reconstitution strategy to further enhance asset quality. We favor discounted prime Office exposure; CCT's implied market value is S$1,460 psf, 10%-15% below recent prime grade transactions, which we think is not representative of CCT's prime portfolio. Maintain Buy and TP; CCT is trading at 0.8X '10E P/B and 6.2% '10E div yield.
FCT – OCBC
Opportunities to create value
Official opening of NP last week. Frasers Centrepoint Trust (FCT)'s recently renovated Northpoint (NP) and recently acquired Northpoint 2 (NP2) were officially opened last week. In recent interviews in connection with the opening, the manager explained that the tenant mix has changed to incorporate more shops targeting youth and more family attractions (the library and new rooftop water playground, for instance)1 . The total NLA of the combined mall is approximately 235k square feet.
Acquisition strategy remains intact. FCT completed the S$290m acquisitions of NP2 and YewTee Point (YP) in Feb. The manager reiterated its intention to focus on the sponsor pipeline in the short to medium term. This includes Bedok Point (construction is 55% completed) and Centrepoint. The acquisition of the latter mall would mark a shift in asset mix away from FCT's current suburban focus. It is unlikely to be acquired in the near term, in our view, as the Somerset micromarket is still in flux with recent news articles reporting new mall Orchard Central is struggling with traffic issues2. The manager also told us that it will look for acquisition opportunities outside Singapore in the medium to long term. FCT currently has an exposure to Malaysia through its 31% stake in Bursa Malaysia-listed Hektar REIT.
Asset enhancement on the cards. FCT's already completed asset works have raised average rent post-enhancement by 41% to S$7.50 per square foot per month for Anchorpoint and by 20% to S$13.20 psf pm for NP (based on guidance). Next on the cards is FCT's biggest mall – Causeway Point (CP), which contributed 63% of 1Q10 revenue. In an interview last week, FCT's new CEO Chew Tuan Chiong said that asset works on CP have a good chance of starting this year3 . We believe the works may not be as income disruptive as NP as the work is likely to be done in stages, but this depends on the enhancement plans proposed by the manager. Revenue will also be supported by contributions from the new acquisitions.
Opportunities to create value. We have adjusted our earnings estimates to reflect the 05 Feb completion of the acquisitions (we had assumed a 01 Apr completion earlier). The acquisitions and the related S$182m private placement have increased portfolio size by 25% to S$1.46b, diversification, and increased free float and potentially also institutional interest. FCT can continue to create value for unitholders through rent increases, asset works and further acquisitions, in our view. Maintain BUY rating and S$1.50 fair value (19% total return).
A-REIT – BT
A-Reit boosts capital base to refinance, fund acquisitions
INDUSTRIAL landlord Ascendas Real Estate Investment Trust (A-Reit) has enhanced its capital structure through a series of capital management initiatives.
As a result, the trust has effectively extended its weighted average debt maturity to 4.5 years – from 2.4 years – and secured funds for acquisitions, it said yesterday.
The trust has extended a $300 million loan that was due this month by seven years to March 2017. It also decided to pay off 165 million euros (S$317 million) of debt due in May 2012 now ‘in view of the significant amount of refinancing expected in the Singapore real estate sector in 2012’.
After the euro debt has been paid off, 23 properties valued at $1.2 billion will no longer be mortgaged. A-Reit has 91 properties in Singapore worth about $4.8 billion in all.
The trust also said a $300 million exchangeable collateralised securities issue – which it announced on Monday – has been successful. The issue attracted strong participation from over 70 institutional investors and was 4.5 times subscribed.
The securities, due in 2017, come with a put option in 2015. They were priced at a coupon and yield to maturity of 1.6 per cent and an exchange price of $2.45 – which is a 25 per cent premium to A-Reit’s closing price on March 15.
A-Reit will use the proceeds from the issue to refinance existing borrowings and finance the acquisition and development of properties.
With all of the initiatives, the trust has increased its weighted average debt maturity and managed to gain funds for future acquisitions.
‘Other than the $150 million medium-term notes and the $138 million committed revolving credit facility due in 2011, A-Reit does not have any major debt refinancing till 2014 and is therefore well positioned to capitalise on growth opportunities moving forward,’ the trust said in a filing to the Singapore Exchange.
A-Reit lost two cents to close at $1.94 yesterday.
A-REIT – CNA
| A-REIT enhances capital base to refinance borrowings, fund acquisitions |
Mainboard-listed Ascendas Real Estate Investment Trust (A-REIT) said it has enhanced its capital structure through a series of capital management initiatives.
It said it has conducted a successful offering of S$300 million of exchangeable collaterised securities (ECS) due in 2017 with a put option in 2015. The ECS was priced at a coupon and yield to maturity of 1.6 per cent with an initial exchange price of S$2.45 per unit.
Proceeds from the ECS issue will be used to refinance its existing borrowings, finance acquisitions and development of properties by A-REIT.
A-REIT added that it has recently successfully extended its S$300-million term loan due in March 2010 by seven years to March 2017.
As a result of all the moves, A-REIT's weighted average debt maturity has been extended from 2.4 years to 4.5 years.