CMT – BT
CMT issues 2-year notes
CAPITAMALL Trust, Singapore’s largest property trust, said yesterday it had issued $155 million worth of two- year fixed-rate notes bearing an annual interest rate of 3.25 per cent. The notes, issued under its $1 billion multicurrency medium-term note programme, will mature on April 1, 2010. The proceeds will be used mostly for general working capital, CapitaMall said in a statement.
CapitaMall competes with other Singapore-listed real estate investment trusts (Reits) which own offices and retail malls, including Suntec Reit, Macquarie MEAG Prime and Frasers Centrepoint. — Reuters
CMT – UOBKH
Proactive Enhancements
CapitaMall Trust (CMT) invests in quality income-producing real estate used for retail purposes. It owns 13 retail malls strategically located in suburban areas and downtown core. CMT is the largest retail REIT in Singapore with a market share of 13% for private retail stock. It also has a 20% stake in CapitaRetail China Trust (CRCT), a China-based retail REIT listed on Singapore Exchange. CMT was assigned a corporate rating of A2 with a stable outlook by Moody’s Investor Services.
Creating office blocks at Funan DigitaLife and Tampines Mall. CMT has received provisional permission to utilise unused gross floor area (GFA) of 385,500sf for Funan DigitaLife, which has only utilised 3.8 of its allowable plot ratio of 7.0. The unused GFA will be utilised to build a four-storey office block with an estimated net lettable area (NLA) of 277,630sf on top of the existing mall. NLA for retail will also increase 14% from 296,601sf to an estimated 338,360sf. In addition, CMT has been granted an increase in plot ratio for Tampines Mall from 3.5 to 4.2. The additional GFA of 95,000sf will be utilised to build an office block on top of the existing mall. We expect construction to be completed by 2H10 and have factored in contributions from the two office blocks starting 1Q11.
CMT provides 2008 distribution yield of 4.51%, a healthy spread of 2.35% over 10-year Singapore government bond yield of 2.16%. Our target price is S$3.83 based on the two-stage dividend discount model.
CCT – BNP
One George Street – Not a sweet deal
Option to acquire One George Street
CCT has obtained an option to acquire One George Street (OGS) building from CapitaLand at SGD1.17b. OGS is a Grade A office located in Raffles Place. The offer price works out to SGD2,600/sqft of NLA, which includes income support from CapitaLand for a period of five years. The minimum NPI guarantee of SGD49.5m pa represents a 4.25% yield and an implied rental rate of SGD10.50/sqft.
To be 100% debt funded
CCT intends to fund OGS with 100% debt. It has secured committed funding for the entire purchase price. However, no covenant agreement has been established for the interest rates, leaving it exposed to interest rate fluctuations between now and its EGM at end-June 2008. With this acquisition, CCT’s gearing will rise from 27% to 40%.
Not quite a sweet deal
CCT has been successful in its recent fund raising, securing competitive interest rates at 3.1% for two of its MTN tranches, which amounted to SGD250m. In view of the high cost of long-term debt (in excess of 4%), we believe CCT will likely embrace a short-to-medium term debt capital structure to justify any immediate accretion to this acquisition. Taking into account the one-off 1% acquisition fee and assuming a 3% borrowing cost, the acquisition of OGS will be mildly yield accretive.
Weak positive carry could deteriorate credit metrics
The outright drawback from this deal is the risk of a ratings downgrade by Moody’s from A3 to Baa1. While OGS may enhance CCT’s asset quality profile and income diversity, we believe this deal could potentially deteriorate its credit metrics as the relatively low yield from OGS compared with its interest cost is likely to drag down its overall portfolio interest cover from our FY08 estimate of 4.1x. Given the low inherent rents from OGS existing tenants (about SGD4-5/sqft) and only 50% NLA expiry over 2008-09, it may take well over three years for OGS’ intrinsic rents to exceed the SGD10.50/sqft mark, hence any recovery in its interest cover. Should this deal transpire, we project CCT’s interest cover to fall to about 3.74x, assuming a borrowing cost of 3%. We remain neutral on this deal but maintain our BUY and TP of SGD2.56.
MI-REIT – SGX
For immediate release
31 March 2008
COMPLETION OF ACQUISITION OF 7 CLEMENTI LOOP
MacarthurCook Investment Managers (Asia) Limited (“MCKIM Asia”), the Manager of MacarthurCook Industrial REIT (“MI-REIT”), refers to its announcement on 30 August 2007 in relation to the acquisition of the property at 7 Clementi Loop.
The Manager is pleased to announce that the acquisition was completed today.
KREIT – BT
K-Reit may raise more funds after its rights issue
K-REIT Asia will look at more forms of financing once its $551.7 million rights issue is completed, Tan Swee Yiow, chief executive of the trust’s manager, told BT.
The real estate investment trust (Reit) is holding an extraordinary general meeting today to get shareholder approval for a rights issue to raise $551.7 million in gross proceeds – partly to repay the $942 million bridging loan it took from Keppel Corp when it purchased its one-third stake in One Raffles Quay (ORQ) last year.
K-Reit is expected to get the mandate for the rights issue easily enough. But shareholders will want to know what plans the trust has to raise the balance needed to repay the loan.
Mr Tan said that the management is well aware of the need to raise more funds, and will address the issue with ‘appropriate debt instruments’ after the rights issue.
‘The $942 million is a bridging loan and we will have to resolve it somehow,’ said Mr Tan. ‘We will have to address that, but we are not addressing it at the same time as the rights issue because we want to do the rights issue first,’ Mr Tan said.
The rights issue, which will significantly reduce the Reit’s gearing, will put the trust in a better place to negotiate with banks, he said.
Upon completion of the rights issue, K-Reit’s gearing will be cut to 27.7 per cent, from 53.9 per cent at present, which is approaching the maximum allowable limit of 60 per cent.
To raise more funds, K-Reit will look at a variety of options, including convertible bonds, commercial mortgage-backed securities and straight debt, Mr Tan said.
Right now, the rights issue means that Keppel Corp and Keppel Land, which have both given irrevocable undertakings to take up their respective allocations of the rights units, could increase their stakes in the Reit. As at end-February, KepCorp and KepLand together owned 72.7 per cent of the Reit.
Mr Tan said that this ‘can’t be helped’. K-Reit had initially decided to go with a convertible bond and unit issue to finance its ORQ purchase. But the plan had to be called off because of weak equity and credit markets. If the issue had gone through, both KepCorp and KepLand would have reduced their stakes, Mr Tan said.
‘Moving forward, if the situation is appropriate, there is nothing to stop them (KepCorp and KepLand) from reducing their stakes, which is the long-term plan,’ Mr Tan said. He is also Keppel Land’s chief executive for Singapore Commercial.