First REIT – SGX
First REIT’s 2Q07 distributable income up 3.8% to $4.5M as healthcare portfolio grows
Maiden contribution from three recently acquired nursing homes
2Q07 DPU of 1.65 Singapore cents represents an annualised distribution yield of 8.19%
Successfully completes fourth acquisition this year – Adam Road Hospital
SINGAPORE – 23 July 2007 – Bowsprit Capital Corporation (the “Manager”), the manager of First Real Estate Investment Trust (“First REIT”), Singapore’s first healthcare real estate investment trust, today announced that First REIT’s distributable income of S$4.5 million for the second quarter of FY2007 ended 30 June 2007 exceeded forecast by 3.8%.
At the same time, First REIT is also pleased to announce that it has successfully completed the acquisition of Adam Road Hospital for a purchase consideration of S$14.9 million. This represents First REIT’s fourth completed acquisition since its listing in December 2006 and clearly demonstrates its commitment to expand its asset portfolio and strengthen property income.
In the second quarter of FY2007, First REIT’s net property income rose 8.6% to S$6.5 million as maiden contributions from its three recently-acquired nursing homes in Lengkok, Senja and Lentor kicked in. Both the Lengkok and Senja nursing homes were acquired on 11 April 2007, while the acquisition of Lentor nursing home was completed on 8 June 2007.
First REIT’s distribution per Unit (“DPU”) for the second quarter was 3.8% higher than forecast, amounting to 1.65 Singapore cents, representing an annualised yield of 8.19% based on the closing price of S$0.805 per Unit on 20 July 2007.
The Books Closure and Distribution Payment dates are 1 August 2007 and 29 August 2007 respectively.
Commenting on First REIT’s results, Dr Ronnie Tan, Bowsprit’s CEO said, “We believe that our yield of 8.19% continues to be one of the highest among Singapore REITs. With a clear focus in Asia’s booming healthcare sector, First REIT offers investors a unique and growing asset class which holds immense potential for yield and capital growth. We are well on an aggressive acquisition trail and the Management is confident of raising our asset portfolio to S$500 million before 2009.”
Indeed, since its listing in December 2006, First REIT has expanded its asset base by about 20%. It currently has eight healthcare assets totalling S$308.0 million, compared with four assets at S$257.0 million at IPO last year.
Capital Management
To fund its acquisitions, First REIT has in place a clear financing structure with a S$90 million term loan facility with the Oversea-Chinese Banking Corporation. S$51 million of the proceeds have been utilised to date for First REIT’s acquisitions. Including the latest acquisition of Adam Road Hospital, First REIT’s gearing stands at 16.5%.
“Compared with other REITs, our gearing is still relatively low and this gives us headroom to undertake more accretive acquisitions. We are currently in active negotiation with a number of vendors in the region, which we hope will lead to a few additional acquisitions soon,” added Dr Tan
Potential Acquisitions
Besides acquiring assets from other vendors in the region, First REIT is also exploring potential acquisitions with its Sponsor, Lippo Karawaci.
Potential pipeline includes Siloam Hospitals Lippo Cikarang, and a 29-storey, 210-bed specialist hospital, called Siloam Hospital Semanggi, which will house Indonesia’s first private cancer treatment centre with state-of-the-art equipment – the Mochtar Riady Comprehensive Cancer Centre (“MRCCC”). Collectively known as the “Building of Hope”, Siloam Hospital Semanggi and MRCCC is expected to be completed and operational by December 2008.
In addition, according to Lippo Karawaci, expansion plans are underway at Siloam Hospitals West Jakarta and Siloam Hospitals Surabaya. When completed, First REIT has the option of acquiring the expanded real estate under terms of the Master Lease agreement.
“First REIT has the benefit of a regional reputable sponsor that is committed to expanding its healthcare business. With the first right of refusal under terms of the Master Lease agreement, Lippo Karawaci’s growing healthcare facilities form a solid pipeline of potential acquisitions for us, while we continue to explore other acquisition targets in the region,” added Dr Tan.
Barring unforeseen circumstances, First REIT is confident of delivering on its 2007 forecast distribution of 6.51 cents.
AllCo – SGX
Asset Valuation of Allco REIT Properties
The Board of Directors of Allco (Singapore) Limited (the “Manager” or “Allco Singapore”), the manager of Allco Commercial Real Estate Investment Trust (“Allco REIT”) (SGX:ALLC) announces that independent valuations1 of the China Square Central, 55 Market Street, Central Park (Perth) and Centrelink (Canberra)2 properties (collectively, the “Properties”) have been completed.
The revaluations have resulted in an increase of S$182.0 million (22.1%) over the valuations of the Properties3 as disclosed in the 2006 Audited Consolidated Financial Statements of Allco REIT as at 31 December 2006. The revaluations have been completed in accordance with the relevant accounting standard, Financial Reporting Standard 40 Investment Property, and the Property Funds Guidelines.
The valuation of each Singapore property was conducted by Savills (Singapore) Pte Ltd and the valuation of Central Park (Perth) was conducted by CB Richard Ellis Pty Ltd. The valuations of Centrelink (Canberra) were conducted by both CB Richard Ellis Pty Ltd and Colliers International Consultancy and Valuation Pty Limited.
The valuation details are as follows:
Source : SGX
CCT – OCBC
Buys Wilkie Edge
Flat sequentially. CapitaCommercial Trust (CCT) released its 2Q07 on Friday. Revenue came in at S$S$59.4m (+91.1% YoY and +2.5% QoQ) with distributable income at S$29.28m (+84.7% YoY and +0.1% QoQ). Distributable income per unit (DPU) came in at 2.12 cents (+19.8% YoY and 0.5% QoQ), slightly below OIR’s estimate of 2.17 cents. The strong annual numbers were attributed to the inclusion of Raffles City (RC), higher rental and car-park rates as well as investment income.
Buys Wilkie Edge from CapitaLand. CCT also announced the proposed acquisition of Wilkie Edge, a 12-storey mixed development from CapitaLand (CapLand) for S$262.0m. Completion is expected by end 2008. With this, CCT appears to be changing its strategy by going for pre-completed and untenanted assets. This raises the risk profile and reflects the difficulty in acquiring accretively. As part of the agreement, CCT has granted CapLand a 99-year lease for the service apartments for S$79.3m. We estimate the GFA of the apartments at about 160,350 sq ft, which means selling price of about S$495psf. This appears a little low considering that residential units are going for substantially higher in the area.
Expect divestment gains. Separately, Quill Capita Trust, the Malaysian associate of CCT, will be buying CCT’s interest in Wisma Technip. The acquisition price of RM125m will result in CCT recognizing a divestment gain of RM4.4m (about S$2.0m), but the transaction is not expected to complete until 4Q07.
Raffles City asset enhancement. CCT is presently enhancing Raffles City. It is decanting space used for mechanical and engineering equipment and this in turn will release about 41,000 sq ft of space for retail use. The new space will be spread over 3 levels and will encompass building a 3-storey island podium. The estimated capex is about S$56m and funding will be via debt. We see no issues with respect to debt funding. Construction has started and completion is expected by end 2007.
Maintain HOLD. The outlook for the office sector remains good for the next two years due to limited supply. CCT is the key beneficiary of this macro trend. Hence we anticipate strong organic earnings growth. However, at present trading level, we see limited upside potential. We thus maintain our HOLD rating with a fair value estimate of S$2.62, based on a target asset size of S$5.5bn.
CCT – DBS
Acquisition ahead of time
1H07 results in line. CCT reported 1H07 results with DPU registering y-o-y growth of 21.2% to 4.23 cents. This translates to annualised DPU of 8.53 cents, in line with expectations.
Rising capital values. On the back of rising capital values, CCT’s portfolio has been revalued upwards by S$730m (+19%). This raises NAV by 28.5% to S$2.39, which in turn raises debt headroom with gearing lowered from 30% to 25%. Notably, as evident of strong reversions experienced for assets along fringe locations in CBD, Capital Towers and Robinson Point enjoyed highest revaluations with +35% and +36% respectively.
Wilkie Edge acquisition. Along with the results, CCT announced an acquisition from Sponsor, Capitaland, marching towards AUM target of S$5bn-S$6bn by FY09. The asset is named “Wilkie Edge”, a 12-storey mixed development consisting of office, retail and service apartments currently under construction and targeted for completion by 4Q08. This asset was acquired at S$262m based on market cap rates. There is, however, an option by Capitaland to withhold the service apartment portion, which would bring down the value of acquisition to S$182.7m. After missing out on the Temasek Towers acquisition understandably due to aggressive bidding by private property funds, this piece of acquisition reaffirms the developer’s sponsor tieup relationship with Capitaland and commitment to grow CCT.
Hold recommendation and TPS$ 2.97 maintained. With results and acquisitions momentum on track, we are maintaining our Hold recommendation and target price unchanged at S$ 2.97.
CCT – BT
CapitaCommercial Trust to buy Wilkie Edge from CapitaLand
Proposed acquisition comes as CCT posts 84.7% rise in Q2 income to $29.3m
CapitaCommercial Trust (CCT), which yesterday posted an 84.7 per cent jump in Q2 group distributable income to $29.3 million, is buying Wilkie Edge, a mixed development coming up on the former Selegie Complex site, from parent CapitaLand.
And the trust is not ruling out buying over CapitaLand’s stakes in other Singapore office buildings to grow its local portfolio, David Tan, CEO of CapitaCommercial Trust Management Ltd (CCTML), indicated yesterday.
CapitaLand owns 55 per cent of Chevron House (formerly Caltex House), 50 per cent of Hitachi Tower and 50 per cent of 1George Street (the last through the Eureka Office Fund) here.
The proposed acquisition of Wilkie Edge also reflects an extension of CCT’s strategy, from buying only completed buildings to acquiring buildings under development on a pre-commitment basis and taking direct stakes in development projects, both in Singapore and abroad, CCTML chairman Richard Hale said.
But market watchers say that probably the most compelling growth story for the trust, which is one of Singapore’s biggest office landlords, is that it is poised to take advantage of the robust office rental growth over the next two years, with more than half of its office portfolio up for renewal in 2008-2009.
CCT owns Capital Tower, 6Battery Road, Raffles City complex (60 per cent), HSBC Building, Robinson Point and StarHub Centre.
The buoyant office market helped the group to chalk up a $730.2 million increase in valuation of its properties in six months, from $3.8 billion as at Dec1, 2006, to $4.6 billion as at June1, 2007. ‘As the prospects of office market rentals in Asia remain positive, CCT will look at acquiring commercial assets in Asia including Vietnam,’ CCT said.
The acquisition of Wilkie Edge, which is under construction, will boost CCT’s portfolio to about $4.8 billion.
The 12-storey development, being built on a 99-year leasehold site, will comprise about 103,200 sq ft net lettable area of offices, 36,500 sq ft of retail space, and 154 serviced apartments when it is completed late next year.
CCT said the purchase consideration for Wilkie Edge is $262 million. CCT is granting CapitaLand and/or its nominee an option to lease the serviced apartments for the remainder of the 99-year leasehold tenure less one day, for a $79.3 million consideration. If the option is exercised, the purchase consideration to CCT will be reduced to $182.7 million or about $1,313 per square foot of net lettable area for the office, and retail components as well as the common areas including car parks.
In September last year, CapitaLand’s serviced residences arm The Ascott Group inked a memorandum of understanding to manage Wilkie Edge’s serviced residences for an initial 10-year term with an option for a further 10 years.
Market watchers say they would not be surprised if either Ascott or its associate Ascott Residence Trust exercises the option to purchase Wilky Edge’s serviced residence component.
The 85 per cent year-on-year rise in the trust’s distributable income for Q2 ended June30, 2007 was due to the yield-accretive acquisition of Raffles City in September 2006 and higher office rents. Renewals and new leases in the group’s office portfolio in the first half of this year were at 99.8 per cent and 124.3 per cent respectively higher than preceding rental rates.
Gross revenue (at group level) for Q2 rose 91.1 per cent from $31.1 million to $59.4 million. Net property income increased 82.7 per cent to $43.5 million. Distribution per unit (DPU) for Q2 was 2.12 cents, up from 1.77 cents in the same year-ago period.
The latest Q2 DPU works out to an annualised figure of 8.50 cents, reflecting an annualised distribution yield of 2.9 per cent based on CCT’s closing price of $2.95 yesterday.
For the first half of this year, DPU was 4.23 cents, reflecting an annualised figure of 8.53 cents, surpassing the 7.60 cents forecast for the whole of 2007 based on CCT’s circular in August last year.