Suntec REIT

tfwee · Veteran

RE: Suntec REIT

KK · Guru

BT Published October 13, 2005
CDL rejects Suntec Reit's bid to end deal
It wants trust to spell out response to regulators' reply on draft circular

(SINGAPORE) City Developments Ltd (CDL) has rejected Suntec Reit's move to terminate a deal under which Suntec was to have bought 11 properties from CDL for $788 million. Suntec called off the deal on Tuesday night on the grounds it could not obtain regulatory approvals in time to convene an extraordinary general meeting of unit holders by Sept 30. The properties to have been bought from CDL include Fuji Xerox Towers, Plaza By The Park and City House.

CDL said last night that Suntec gave it written notice on Tuesday purporting to terminate the deal because a condition could not be met 'despite Suntec Reit's best endeavours'. CDL said that under the deal, Suntec was obliged to use its best endeavours to fulfill this condition. CDL, through its lawyers, is therefore asking Suntec to spell out what action it took. Pending Suntec's response, CDL said it does not accept the deal is terminated. Suntec declined to comment last night.

The development could put the two groups on a collision course over their high-profile deal announced on June 30.

Industry sources say Suntec could not obtain regulatory approvals because regulators were concerned over its plan to make deferred payments for 9.9 per cent of the price of the CDL properties. The sources said Suntec sought regulatory approval perhaps two or three months back for a draft circular it intended to send to unit holders. Typically, such a draft is submitted to the Singapore Exchange (SGX) for clearance. The Monetary Authority of Singapore, which oversees regulations for Reits, would also give input. A source said it takes several weeks for the regulators to clear such drafts. Queried last night, MAS said it does not comment on dealings with individual institutions. SGX also declined to comment.

The question CDL wants answered is: if regulators provided feedback on the draft, how did Suntec respond. An industry source said CDL could take legal action if it is not satisfied by Suntec's response.

An analyst speculated that the decline in Suntec's share price since the deal was announced on June 30 may mean it is no longer yield-accretive. In other words, instead of helping to increase Suntec's distribution per unit (DPU), it would cause DPU to drop. When the deal was announced, Suntec's unit price was $1.22. It was down 7 per cent to $1.13 on Tuesday this week. It is possible the deal was marginally yield accretive at a unit price of $1.22, but not accretive at $1.13.

Suntec's unit price declined one cent yesterday to close at $1.12. The Reit is trading at a forecast distribution yield of 5.7 per cent, according to analysts' estimates. CDL's share price fell 15 cents yesterday, closing at $9.25.

tfwee · Veteran

UPDATE: CityDev Not Accepting Termination Of Suntec Deal
(Recasts with comments, background information.)

SINGAPORE (Dow Jones)--City Developments Ltd. (C09.SG) Wednesday said it won't accept Suntec Real Estate Investment Trust's (T82U.SG) move to scrap the purchase of 11 CityDev properties for S$788 million (US$466 million).

The deal, which would have resulted in a one-time pretax profit of S$342.3 million for CityDev, was called off after Suntec invoked an agreement clause that states either party may terminate the pact if Suntec unitholders' approval couldn't be obtained before Sept. 30.

The cancellation is seen as positive for Suntec, however, as it "helps clear some of the negative sentiment surrounding the deal," said Daiwa Investment Research analyst David Lum.

In a statement to the Singapore Exchange, CityDev said it is, "through its lawyers, seeking information from Suntec REIT of what actions/steps Suntec REIT has taken to discharge its best endeavors obligation."

"Pending a satisfactory response from Suntec REIT, the vendors have not accepted Suntec REIT's purported termination of the agreements," added CityDev, Singapore's second largest property company by market capitalization after CapitaLand Ltd. (C31.SG).

Suntec declined to respond to CityDev's comments.

On June 30, Suntec announced a deal to buy Fuji Xerox Towers, City House and Plaza at the Park and eight other properties from CityDev. Included in the package were car parks and strata title units at old suburban shopping malls such as Katong Shopping Center.

Strata title units are units in commercial buildings owned directly by a person or company. Such buildings are generally harder to redevelop, unlike buildings held by a single entity with several shareholders, since approval is required from every owner rather than the majority of shareholders.

The agreement was soon shrouded in controversy after state-owned investment firm Temasek Holdings Ltd. Chief Executive Ho Ching spoke out against "clever financial engineering" by some REIT managers aimed at inflating the short-term performance of their trusts.

Although Ho, wife of Singapore Prime Minister Lee Hsien Loong, didn't cite any manager by name, her comments threw into focus Suntec's plan to defer 10% of the payment to CityDev to a later date, which will have the effect of boosting the REIT's yields in the short term.

It was subsequently reported in local media that Suntec was having difficulty getting regulatory approvals that were needed ahead of an extraordinary general meeting of unitholders to approve the CityDev deal.

Suntec will, however, proceed with its S$230 million acquisition of Park Mall from Wing Tai Holdings Ltd. (W05.SG) that was announced the same day.

KK · Guru

Extracts fm SGX Announcement,

The Directors of City Developments Limited (the "Company") refer to their announcement dated 30 June 2005 relating to, inter alia, various conditional sale and purchase agreements (the "Agreements") entered into on that date between the Company and its subsidiaries, as vendors, and HSBC Institutional Trust Services (Singapore) Limited, in its capacity as trustee of the Suntec Real Estate Investment Trust ("Suntec REIT"), as purchaser, of long-term leasehold interests in 11 commercial properties for an aggregate consideration of S$788 million. The Agreements were entered into based on the valuations of a professional independent valuer engaged by Suntec REIT. Suntec REIT was also advised by two leading investment banks.

The Directors wish to inform shareholders that Suntec REIT had on 11 October 2005 delivered written notices to the Company and the other respective vendors purporting to terminate the Agreements on the grounds that a condition precedent under each of the Agreements was not met despite Suntec REIT's best endeavours. Under the Agreements, Suntec REIT is obliged to use its best endeavours to procure fulfillment of this condition precedent. The Company, through its lawyers, is seeking information from Suntec REIT of what actions/steps Suntec REIT had taken to discharge its best endeavours obligation. Pending satisfactory response from Suntec REIT, the vendors have not accepted Suntec REIT's purported termination of the Agreements and have reserved all their rights under the Agreements.

By Order of the Board

Shufen Loh @ Catherine Shufen Loh
Enid Ling Peek Fong
Company Secretaries

Dated : 12 October 2005

tfwee · Veteran

Extracted from UOBKH.

SIN: Property: Suntec REIT calls off deal to buy 11 properties from City Development

Suntec REIT announced last evening that it is calling off the deal to purchase the 11 properties from City Dev as a package for S$788m. However, the acquistion of Park Mall from WingTai is still scheduled to go through as per normal. The deal was called off as Suntec was unable to obtain the necessary regulatory approvals to convene an EGM and obtain unitholders approval of the deal by 30 Sep. The primary reason most likely for this was the proposed use of deferred payments for the deal.

There is a possibility that the deal could be re-negociated between CDL and Suntec REIT. Given that we viewed the deal as a positive for CDL and negative for Suntec REIT, we could see some pressure on CDL today and some buying interest in Suntec REIT. However, the office market in Singapore has improved since the deal was initially negotiated and hence the impact on CDL is not likely to be much. Our RNAV for CDL is S$7.54. We will review our RNAV and target price for City Development.

tfwee · Veteran

Newspaper Web site: http://business-times.asia1.com.sg

SINGAPORE PRESS: Suntec Reit Scraps CityDev Ppties Deal
SINGAPORE (Dow Jones)--Suntec Reit (T82U.SG) has abandoned its S$788 million purchase of 11 properties from City Developments Ltd. (C09.SG), the Business Times reports.

But the real estate investment trust will still proceed with its S$230 million acquisition of Park Mall from Wing Tai Group, the paper adds.

In an announcement yesterday evening, Suntec Reit said it "was unable to obtain the necessary regulatory approvals to convene an EGM of unitholders and to obtain the unitholders' approval by Sept. 30," the report says.

On June 30, Suntec Reit announced a deal to buy CityDev's properties, including Fuji Xerox Towers, City House and Plaza at the Park as well as Wing Tai's Park Mall.

It was to have convened an extraordinary general meeting of its unitholders by Sept. 30 to get their approval. The completion date for the acquisition of the properties was to have been this coming Saturday, the Business Times says.

The paper quotes Yeo See Kiat, chief executive of Suntec Reit, as saying: "The timeline for the transaction has come to pass, hence the current agreements have come to an end."

As to whether the deal with CityDev will be renegotiated, Yeo said: "We are open to future discussions."

It is understood that CDL will be issuing a statement on the development, the paper says.

Citing unnamed market sources, the Business Times says that the circular for the unitholders' EGM had to be approved by the Monetary Authority of Singapore and the Singapore Exchange and Suntec Reit could not obtain the relevant approvals in time.

Comment: Woah, the deal was announced in June 2005 and it take them a few months to get approve from MAS and Singapore Exchange. Look like Suntec may miss the chance to accquire properties at a low prices. With recent rise in property counters, maybe CDL may want to increase it valuation of their properties or maybe they may decide to do their own REIT. This is the second time that ARA group fail to expand the properties under SUNTEC Reit. Maybe it would be good that SUNTEC and PRIME merged

KK · Guru

SINGAPORE (XFN-ASIA) - Suntec Real Estate Investment Trust (Suntec REIT) said it has terminated an agreement to buy 11 properties worth 788 mln sgd from City Developments Ltd after failing to secure regulatory approval on time. The deal was first announced in June, but approval was delayed after the Monetary Authority of Singapore failed to clear the deal on time so that it could be presented for approval by Suntec REIT shareholders at a meeting on September 30.

"Despite having used its best endeavours, Suntec REIT was unable to obtain the necessary regulatory approvals in order to convene a (shareholders' meeting) and to obtain (shareholders') approval by September 30," Suntec REIT manager ARA Asset Management said. "As the condition precedent under the agreements could not be satisfied within the requisite time frame, the manager wishes to inform (shareholders) that the agreement have been terminated," it added.

The City Developments deal is believed to have been scrutinized by the authorities because the deal involves deferring the payment of about 9.9 pct of the purchase price.

The deal was announced together with the proposed acquisition of Park Mall, which is majority owned by Wing Tai Holdings, for 230 mln sgd. Wing Tai had previously expressed confidence the deal will go through. "We have no reason to believe that it will not go through," Wing Tai chairman and managing director Cheng Wai Keung said in August. The deal should be completed by the end of the year, Wing Tai said.

KK · Guru

Fm SGX Announcements,

AGREEMENTS RELATING TO THE ACQUISITION OF 11 PROPERTIES DIRECTLY OR INDIRECTLY OWNED BY CITY DEVELOPMENTS LIMITED (“CDL”)

The board of directors of ARA Trust Management (Suntec) Limited (the “Manager”), as the manager of Suntec Real Estate Investment Trust (“Suntec REIT”), refers to its announcement of 30 June 2005 in relation to agreements entered into for the acquisition by Suntec REIT of 11 properties (the “Properties”) directly or indirectly owned by CDL (the “Agreements”). Completion of each of the Agreements is subject to and conditional upon, amongst others, unitholders’ approval given at an extraordinary general meeting (“EGM”) (the “Unitholders’ Approval”) for the purchase of the Properties, the proposed equity fund raising by issue of new units (the “New Suntec Units”) to partially fund the acquisition of the Properties and the issue of the deferred units (the “Consideration Units”) to the respective vendors. Under each of the Agreements, where the Unitholders’ Approval is not obtained by 30 September 2005, either party to the Agreements may elect to terminate the Agreements by written notice to the other. Despite having used its best endeavours, Suntec REIT was unable to obtain the necessary regulatory approvals in order to convene an EGM of unitholders and to obtain the Unitholders’ Approval by 30 September 2005. As the condition precedent under the Agreements could not be satisfied within the requisite time frame, the Manager wishes to inform unitholders that the Agreements have been terminated.

KK · Guru

All abt Suntec REIT

-- Edited by KK at 19:33, 2005-10-03

Suntec Reit Announcements

-- Edited by tfwee at 13:29, 2005-10-04