Indiabulls – BT
MUMBAI – Indiabulls Properties Investment Trust said on Friday it had priced its initial public offer of shares in Singapore at $1 (73 US cents) each, the lower end of the indicative price band, to raise $353.5 million (US$259 million).
The real estate investment trust, a unit of Indiabulls Real Estate, India’s fourth-largest developer by market value, had extended the retail portion of the offer by one day to Friday as it was not fully subscribed.
The offer opened on June 2 with an indicative range of $1 to $1.10. The shares are set to list on June 11, a filing to the Singapore Stock Exchange showed, marking the first Reit listing in Singapore since November.
The 353.5 million shares issue is made up of a public offer of 262.5 million shares and an already completed sale of 91 million shares to a firm owned by LN Mittal, the chief executive of Arcelor Mittal, the world’s largest steel maker.
The last two Reits to list in Singapore, Lippo-Mapletree Indonesia Retail on Nov 19 last year and Saizen Reit on Nov 9, tanked on their debuts amid turmoil in global markets.
Deutsche Bank and Merrill Lynch arranged the share sale. The Reit has two Mumbai projects under development carrying a total of 3.4 million square feet of space.
Indiabulls Real Estate shares, which have fallen 43 per cent so far in 2008, rose 4.6 per cent at 424.10 rupees on Friday in a Mumbai market that fell 1.25 per cent. — REUTERS
IndiaBulls – OCBC
Indiabulls Properties Inv
New Indian property trust on SGX. Indiabulls Properties Investment Trust (IPIT) is a business trust focused on office spaces in India. This is the second India-centric trust on SGX after Ascendas India Trust. IPIT is sponsored by Indiabulls Real Estate Ltd, one of India’s largest property developers. As per its public listing on the SGX Mainboard, IPIT is offering 262.5m shares, priced between S$1.00 and S$1.10. At the same time, IPIT is issuing cornerstone1 units and consideration2 units that will partly fund the purchase of the initial portfolio. All in, IPIT will raise S$2592.2m in gross proceeds, based on the S$1.10 price.
Two Mumbai properties. IPIT will use the IPO proceeds to acquire two properties in Mumbai, India – One Indiabulls Centre and Elphinstone Mills – which are slated to be ready by 30 June and end 2008 respectively. The properties are designed for IT and financial firms, and together offer 3.3m square feet of office space. One Indiabulls Centre also features 438,000 sf in retail space and has a residential component as well. The two properties are characterized as Grade A and Knight Frank values them at S$4,368m in total. IPIT will pay S$2559.2m in cash and units.
Large pipeline, no gearing limit. IPIT sees great opportunity in the Indian office market, which is currently seeing 98-99% occupancy levels. Mumbai is said to be the fourth most expensive city in the world in terms of office rents, with Singapore coming in at number nine (CB Richard Ellis). IPIT’s sponsor has granted the trust a Right of First Refusal (ROFR) for five other properties. While structured as a business trust – which has no gearing limit – IPIT says it will limit its gearing to 35% by 31 Mar 2010 (or 60% if it obtains a credit rating). This puts IPIT on equal footing with the S-REITs.
4.7% to 5.1% DPU yield projected for FY09. The trust is projecting an FY09 dividend yield of 5.1% and 4.7% based on the minimum and maximum offering price of S$1.00 and S$1.10 respectively. This yield assumption is based on certain entitlement and subordination agreements. Without those agreements, FY09 yield comes to 2.6% to 2.9%. For FY10, IPIT is projecting a 8.9% to 9.8% yield based on the IPO price range. Ascendas India Trust, its closest comparable, is trading at a 6.5% yield. Meanwhile, the last two REITs to list in Singapore – Lippo Mapletree Indonesia Retail Trust (Indonesia) and Saizen REIT (Japan) – are currently trading at deep discounts to their IPO prices. We do not have a rating on the stock.
1 Cornerstone investor: Wellmark Investments Ltd (91m common units)
2 The consideration units will partly fund the acquisition of the initial portfolio. They comprise of 504.9m common units and 1,498.2m subordinated units (their entitlement to distributions is subordinated to common units for FY09 and FY10).
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Indiabulls – BT
MUMBAI – Indiabulls Properties Investment Trust said on Thursday it had extended the retail portion of its US$284 million initial public offer of shares in Singapore by a day to Friday.
The company, a unit of India’s fourth-largest developer by market value Indiabulls Real Estate, did not give a reason, but a banker involved in the deal said the extension was because the retail component, comprising 5 per cent of the total offering, was not fully subscribed.
The banker, who did not want to be identified, said 1,000 subscribers were required to close the retail portion and had reached 700.
The 353.5 million share sale in an indicated price band of S$1-S$1.10 had opened on June 2.
‘The joint issue managers, financial advisers, book-runners and underwriters have closed the book of orders for the placement tranche,’ the company said in a statement, suggesting the institutional book was covered.
Deutsche Bank and Merrill Lynch are the joint managers of the offering.
The parent Indiabulls has handed over two properties under development in Mumbai with a total of 3.4 million sq ft to the trust, the offer document showed.
Shares in Indiabulls Real Estate, whose market value has halved to US$2.5 billion in 2008, were trading 6.6 per cent lower at 385 rupees in a firm Mumbai. — REUTERS
SREIT – UOBKH
Relative attractiveness of REITs affected by spike in bond yield
Long-term government bond yield on the rise. Benchmark 10-year Singapore government bond yield has spiked up from 2.4% to 3.4% last week. We believe this is a knee jerk reaction to the near collapse of the bond market in Vietnam. The worldwide trend of higher commodity prices and sustained inflation is likely to have contributed as well. The increase in Singapore’s CPI from 6.7% in Mar 08 to 7.5% in Apr 08 has reignited fear of runaway inflation.
Short-term interest rates remain unchanged. Fortunately, three-month SIBOR has remained stable at 1.1875%, suggesting ample liquidity in the banking system. This means that Singapore REITs are not affected as most bank borrowings are priced off SIBOR. Singapore REITs has been able to secure loan facilities and issue medium term notes with tenure of two to three years at competitive interest rates. Longer term funding has so far been secured mainly through issue of convertible bonds. The steepened yield curve does pose some challenges as it hampers efforts to secure longer term funding.
Big is beautiful. We remain positive on Singapore REITs with economies of scale, such as CapitaCommercial Trust (office), CapitaMall Trust (retail) and Ascendas REIT (industrial). On average, Singapore REITs provides distribution yield of 5.5%, which is fairly attractive. The strong S$ provides some cushion again inflation. Also, Singapore is drastically different compared to Vietnam, an emerging economy that has just opened itself to foreign investment. Vietnam’s bond and equity markets are relatively small and undeveloped compared to other countries in the region.
We have, however, adjusted our target prices for Singapore REITs to factor in a higher risk-free rate of 2.50% vs previous 2.35%. We will make further adjustments depending on how the financial system responds to higher commodity prices and inflation. Our preferred BUYs for Singapore REITs are Ascendas REIT, CapitaCommercial Trust and Suntec REIT.
Link – Yield Table
CMT – UOBKH
Better Value After Share Price Correction
CapitaMall Trust (CMT) has corrected by 7.4% the two days after we downgraded our recommendation from BUY to HOLD. The correction has brought valuation to a more realistic level.
Value creation through asset enhancement initiative. CMT is expected to complete the acquisition of The Atrium in Aug 08. The Atrium will be amalgamated with Plaza Singapura to create an integrated development with 170m of prime retail frontage along Orchard Road and net lettable area (NLA) of over 900,000sf. State land between the two buildings will be covered by shelters to create an open plaza. The asset enhancement initiative (AEI) will also improve traffic flows from the Dhoby Ghaut MRT station.
About 100,000sf of prime retail NLA on Levels 1 and 2 of The Atrium will be created by decanting lower-yielding spaces. Management plans to use some of the additional retail space for duplex flagship stores fronting Orchard Road. Renovation works will be carried out in phases from 2009 to 2010. We have estimated construction cost at S$400psf and have factored in contribution from the new retail space starting 3Q10.
Upgrade to BUY. CMT owns and operates 13 retail malls strategically located in suburban areas and downtown core. It is the largest retail REIT in Singapore with a market share of 13% for private retail stock. CMT has revised its local target asset size from S$8b to S$9b by 2010. We have raised our target price from S$3.72 to S$3.76 after factoring in contribution from 100,000sf of retail space at The Atrium converted from office space starting 3Q10. Upgraded from HOLD to BUY as the stock provides upside of 13.6%.