Saizen – BT
Saizen Reit defaults on 7.25b yen loan
Property trust says maturity default not likely to affect its ability to operate
Singapore-listed property trust Saizen Reit said yesterday it had defaulted on a 7.253 billion yen (S$112.65 million) commercial mortgage-backed securities loan.
The company said in a statement the ‘maturity default’ was not expected to affect Saizen Reit’s ability to operate as a going concern nor impair its ability to get further financing.
A maturity default occurs when the borrower fails to pay the lender the balloon payment, or principal balance, at maturity.
‘The main impact of this maturity default is an increase in the interest rate from 3.07 per cent to a default rate of 7.07 per cent per annum,’ Saizen said in a statement.
The loan, known as ‘YK Sintoku’, is a non-recourse and not cross-collateralised against other properties in Saizen Reit’s portfolio. It was originally provided by Credit Suisse Principal Investments Ltd, a unit of Credit Suisse, in 2005 and was later securitised and transferred to an issuer of the commercial-mortgage backed securities, the statement said.
Saizen, which went to market in November 2007, is the only Singapore-listed real estate investment trust (Reit) with purely Japanese regional residential properties. — Reuters
Saizen – CNA
Saizen REIT defaults on S$113m loan but unlikely to affect other portfolios, loans
Mainboard-listed Saizen Real Estate Investment Trust said it has defaulted on a commercial mortgage-backed securities loan worth 7.3 billion yen or about S$113 million.
It said despite efforts since early last year, it was unable to find a commercially viable solution before the maturity of the YK Shintoku loan.
The loan is non-recourse and Saizen said the default is not expected to affect its other portfolios or loans.
And it said this is also not expected to affect its ability to operate as a going concern or impair its ability to obtain further financing from financial institutions.
Saizen said the main impact of the maturity default is an increase in the interest rate from 3.07 per cent to a default rate of 7.07 per cent a year.
It doesn’t expect immediate foreclosure by the lender and it said refinancing of the loan is still possible with the consent of the lender.
The REIT said in the event of a foreclosure, the pro forma impact on its net asset value will be a reduction of about 10 per cent.
Meanwhile, CEO of the REIT’s manager, Chang Sean Pey, said efforts to refinance the loan will continue.
He said: “CMBS default is not uncommon in Japan in the past one year. And all this is because the CMBS market basically shut down after the credit crisis. We are continuing talks with banks on the refinancing. It’s just that we need time but we’re continuing to work on that.”
Mr Chang added that the lender is currently in talks with four banks about the refinancing of this loan.
The property trust said it expects to fully repay its other loans maturing over the period from this month to January next year.
CDL H-Trust – CIMB
Ripe for a picking
• Downgrade to Underperform; target price raised to S$1.48 (from S$1.41). CDLHT’s performance met both the Street and our expectations. We lower our interest rates assumptions and roll our target price one year forward, resulting in an augmented DPU and target price. Nonetheless, as its share price has rallied since our last Neutral recommendation, we believe it is time to lock in profits.
• DPU in line. YTD 3Q09 distributable profit (S$49.3m) and DPU (5.9cts) formed 73% of our previous full year forecast of S$67.7m and 8.1cts respectively. Payout to unitholders remained at 90%. 3Q09 DPU of 2.04cts declined 30% yoy due to lower revenue per available room (REVPAR) achieved by the Singapore hotels to S$154 in 3Q09 compared to S$214 in 3Q08. However, on qoq basis, DPU was up 7.7% due to strong recovery in REVPAR.
• Visitor arrivals growth positive, REVPAR up. REVPAR for CDLHT’s Singapore portfolio jumped 15% qoq. This is mainly the result of sharply recovering occupancy (86.1%, +10.6% qoq) in 3Q09 as visitor arrivals to Singapore recovered 7% after 15 months of decline. Average room rates remained relatively flat at S$179 (+0.6%).
• Working to refinance at lower interest rates. Management hopes to capitalise on declining borrowing spreads and refinance its debt on lower borrowing cost. We believe that it would be possible to see lowered interest rates by 1Q10.
• Room rates could move up in the last quarter. As CDLHT’s rooms move towards full occupancy, we believe room rates would be ready to move in tandem in 4Q09. Both integrated resorts have indicated that they intend to price their new hotel rooms at a premium to existing hotels. With the key competition holding up on prices, we believe that CDLHT is well-positioned to move room rates up soon.
• Changes to assumptions. We moderate our cost of debt assumptions from 4% to 3.5% in FY09 and 3% in FY10. Our DPU estimates increase 2-4% in FY09-10. We roll our target price one year forward, and have a higher DDM-derived target price of S$1.48 from $1.41 (discount 9.1%). Whilst we are confident that CDLHT is able to meet our expectations for FY09, its share price has continued to rally up strong even after our last downgrade to a Neutral recommendation. We believe it would be timely to lock in profits at this time. Downgrade to Underperform.
CDL H-Trust – DBS
A fantastic run
• Results signify a demand recovery
• Positive vibes on sector should be priced in
• Looking for further catalysts for re-rating, downgrade to HOLD, TP S$1.57
Easing declines from demand recovery. Gross revenues of S$22.9m (-21.4% yoy , +11.9% qoq) and net property income of S$21.4m (-21.5%yoy, +11.5% yoy) were in line. Sequential growth in 3Q09 was on the back of a 15% growth of average portfolio RevPAR to S$154. Income available for distribution of S$16.9m translated to a DPU of 2.04 Scts after deducting income retained. Balance sheet remained strong at a gearing of c20.2% with interest cover of 10x.
Occupancy driven recovery a good sign. While performance still lagged compared to a year ago, we are encouraged from the sequential improvement in RevPAR. Note that average RevPAR of S$154 (-26 % yoy, +15% qoq) was driven largely by higher average occupancies, which in our view should be more sustainable in the longer run and a signal of a return of business confidence and travel. In addition, we believe that the Formula One race in Sept’09 also helped bumped up performance slightly.
Positive vibes should have been priced in. While we continue to like CDL HT for its exposure to the local tourism scene, at a P/NAV of 1.1x and FY09F-10F DPU yields of 5.1- 6.3%, we current stock price should have already priced in a fair amount of optimism and expectations faced by the local tourism industry. As such, we downgrade CDL HT to a HOLD given limited upside from our target price. TP S$1.57
is maintained. Further re-rating catalysts will hinge on (i) higher than projected tourism performance, (ii) acquisitions
FCT – BT
FCT to buy YewTee Point and Northpoint 2
Buying the malls at this time will be yield-accretive for the trust, says CEO
FRASERS Centrepoint Trust (FCT) is now ready to inject another two retail malls into its portfolio, chief executive Christopher Tang told BT recently.
While Mr Tang did not say when exactly the two malls – YewTee Point and Northpoint 2 – are likely to be bought over from parent company Frasers Centrepoint Ltd, the trust and the malls are all ‘ready’, he said.
Both malls are now stable income-producing properties.
YewTee Point, located next to Yew Tee MRT Station, has seen almost a million shoppers since it soft opened in March this year. The mall, which has a net lettable area of 73,000 square feet, has achieved an occupancy rate of 98 per cent.
Northpoint 2 at Yishun – an extension of Northpoint, which is already part of FCT’s portfolio – is also now seeing good occupancy and footfall, Mr Tang said.
Buying the malls at this time will be yield-accretive for the trust, he said. Previously, as FCT was trading at higher yields (due to a lower share price), buying the properties would not have been yield-accretive.
‘FCT is now trading at 5 per cent above net asset value and FY2010 dividend per unit (DPU) yield of 6.4 per cent, which could mean that acquisition of Northpoint 2 and YewTee Point from its sponsor (about $300 million) could be accretive,’ wrote UBS Investment Research analysts Regina Lim and Michael Lim in an Oct 27 note.
Analysts have also said that FCT can be expected to raise equity for acquisitions soon. The UBS analysts, for example, expect FCT to raise around $130-$170 million in the next four months for acquisitions.
Said CIMB analyst Janice Ding: ‘We believe FCT will use equity and debt to fund its acquisition of Northpoint 2 and Yew Tee Point in a bid to increase its stock liquidity. We have assumed 25 per cent debt and 75 per cent equity for the acquisition.’
The planned injection of the two pipeline assets is also expected to expand FCT’s asset base significantly. UBS estimates that the exercise could lift portfolio size by 27 per cent to around $1.4 billion.
YewTee Point was officially opened last Saturday. With the mall, Frasers Centrepoint unveiled its new ‘neighbourhood’ mall concept.
A neighbourhood mall, Mr Tang explained, is more intimately-sized than a suburban mall and will serve the needs of its immediate community: ‘For instance, residents can enjoy early morning or late-night grocery-shopping at anchor tenant NTUC FairPrice supermarket, which opens its doors at 7am and closes at 11pm.’
Some F&B tenants will also be open until the early hours of the morning, he said.