MMP – BT
MMP Reit refinances $220m short-term loans
MACQUARIE MEAG Prime Reit (MMP Reit) has refinanced $220 million of short-term loans, $190 million of which are due in May and $30 million in August.
‘In light of the strategic review of MMP Reit announced on Feb 19, the new funding has been arranged to extend the maturity of the facilities until end-September,’ said Macquarie Pacific Star, the manager of MMP Reit. This will allow the review to proceed with flexibility. It also removes the need to incur additional costs to unwind longer-term loans, which may be necessary if there is a transaction arising from the strategic review, said the real estate investment trust (Reit) manager.
In its Feb 19 announcement on the strategic review, the Reit manager said the specific objective is to enhance value for MMP Reit unit-holders. The review includes the possibility of the Macquarie Group selling its stake in the Reit.
The financing renewals have been secured on competitive terms and will not have a material impact on distribution per unit to unit-holders, the Reit manager said, adding that the successful refinancing – a continuation of support for the trust by finance providers – shows the strong credit quality of MMP Reit.
‘MMP Reit’s creditworthiness is supported by the high quality of underlying assets, low gearing, rental reversions, occupancy levels and tenancies,’ said Macquarie Pacific Star chief executive officer Franklin Heng.
MMP Reit recently announced an increase in its net asset value to $1.61 per unit as at Dec 31, 2007. The Reit is trading at a discount to this value, closing yesterday at $1.22.
‘We remain committed to securing the most optimal financing arrangements to maximise returns to unit-holders,’ Mr Heng said yesterday. ‘We will continue to monitor MMP Reit’s funding position throughout the strategic review.’
MMP Reit posted a 15.7 per cent year-on-year rise in distributable income to $16.2 million for the fourth quarter ended Dec 31, 2007.
MMP – UOBKH
Secured refinancing
Secured refinancing for short-term loans. MacQuarie MEAG Prime (MMP) REIT has refinanced S$220m of short-term loans, S$190m of which are due in May 08 and another S$30m in Aug 08. The new funding was arranged to extend the maturity of the facilities until end September in light of the strategic review announced on 19 Feb 08. The renewal was secured on competitive terms and will not have a material impact on Distribution Per Unit (DPU). The refinancing will allow the review to proceed with flexibility.
Strategic review could result in restructuring. MacQuarie Pacific Star has embarked on a strategic review with the objective of enhancing value for all MMP REIT unitholders. The review will consider both corporate and asset level strategies and could involve a proposal to take over 100% of MMP REIT.
Reiterate BUY. We like MMP REIT for strategic frontage on Orchard Road. MMP REIT gains full year contribution from overseas investments in China and Japan in FY08. The on-going strategic review could also unlock value for investors. MMP REIT provides FY08 distribution yield of 6.13%, an attractive spread of 4.09% over 10-year Singapore government bond yield at 2.04%. Our target price is S$1.55 based on 2-stage dividend discount model (required rate of return: 7.85%, terminal growth: 2.5%).
AREIT – CIMB
Taking over the helm
Ascendas acquires Goodman’s stakes in A-REIT
A-REIT announced that its parent Ascendas Pte Ltd, through its wholly-owned subsidiaries, had made a double acquisition, by:
1) Purchasing the Goodman Group’s 40% equity stake in Ascendas-MGM Funds Management Limited, the manager of A-REIT, for an undisclosed cash consideration on a willing-buyer willing-seller basis.
2) Purchasing Goodman’s 6.28% direct stake of 83,241,801 units in A-REIT for about S$158.16m on a willing-buyer willing-seller basis.
The acquisition of the shares and units is expected to be completed within 10 business
days from the signing of the agreements.
The impact
Goodbye, Goodman! Upon the completion of the share and unit sales, Goodman will fully relinquish its co-manager role in Ascendas-MGM Funds Management Limited and holdings in A-REIT. Ascendas would then have a 26.77% holding in A-REIT. A-REIT’s manager, Ascendas-MGM Funds Management, would become a wholly-owned subsidiary of Ascendas and will be renamed Ascendas Funds Management (S) Limited.
May open doors to overseas acquisitions. This is a long-awaited move which will leave Ascendas with full control of A-REIT. We see this as positive for A-REIT, potentially opening doors to acquisitions out of Singapore from its parent, Ascendas. Ascendas has at least two overseas funds that may form part of the acquisition pipeline. They are the Ascendas ASEAN Business Space Fund, and the China Industrial and Business Park Fund, both of which acquire and develop industrial properties in their respective regions. However, any acquisition is more likely to happen in the medium to long term, as A-REIT has committed to some S$338m worth
of development projects and has already signed MOUs to acquire S$201m worth of properties over 2008-10.
Valuation and recommendation
Upgrade to Outperform from Neutral; but lowered target price to S$2.60 (from S$2.83). Our target price has been reduced to S$2.60 from S$2.83, in line with a higher cost of equity assumption used in-house. The discount rate in our DDM valuation has been raised to 6.7% from 6.2%.
We are, however, upgrading A-REIT to Outperform after the 15% decline in its share price since late January, vs. the market’s 3% drop. We also like Ascendas’s positive move to take full control of the helm. A-REIT has several things going for it, including:
1) conservative capital management (88% of its debt is on fixed interest rates at a weighted average cost of 3.39% and weighted average term of 3.9 years);
2) low asset leverage of 38.9%, well below the regulatory limit of 60%;
3) venture into development projects which offer property yields higher than the 6-7% yields for completed industrial buildings;
4) high rental reversions for its business park as a result of demand spilling over from the office sector; and
5) strong income streams secured on long leases averaging 6.2 years.
Suntec – SGX
Singapore, 13 March 2008 – ARA Trust Management (Suntec) Limited (“ARA Suntec”), the Manager of Suntec Real Estate Investment Trust (“Suntec REIT”), is pleased to announce that further to the earlier acquisition of approximately 1,261 square metres (13,572 square feet) of land along Penang Road in July 2007, it has today acquired an additional strip of land of about 103 square metres (1,105 square feet) at a land premium of S$1.2 million for amalgamation with Park Mall to create an additional floor area of 474 square metres (5,105 square feet) for the property.
Combined with the earlier acquisition, the total acquisition cost of the land amounted to S$15.6 million, and the total permissible gross floor area for Park Mall will increase by about 6,300 square metres (67,810 square feet) to 41,966 square metres (451,727 square feet).
Mr Yeo See Kiat, Chief Executive Officer of ARA Suntec, said, “I am pleased that we were able to acquire this additional strip of land which would further strengthen our asset enhancement plans for Park Mall.”
Suntec – SGX
Further to the announcements dated 28 February 2008 and 29 February 2008 relating to the issue of convertible bonds due 2013 (the “Convertible Bonds”), ARA Trust Management (Suntec) Limited, as manager of Suntec Real Estate Investment Trust (“Suntec REIT” and manager of Suntec REIT, the “Manager”), is pleased to announce that Singapore Exchange Securities Trading Limited (the “SGX-ST”) has today confirmed that the approval in-principle granted on 14 September 2007 and 8 October 2007, for the listing and quotation of (i) the new ordinary units in Suntec REIT (“Units”) to be issued upon the conversion of the Convertible Bonds (the “Conversion Units”) and (ii) the Convertible Bonds respectively, remains valid.
The Manager intends to issue the Convertible Bonds on or around 20 March 2008.
The SGX-ST’s in-principle approval is not an indication of the merits of the Conversion Units and the Issue of Convertible Bonds.