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Post Info TOPIC: REIT / Fund - News
KK


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REIT News - Reuters
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4 Jul 07

SINGAPORE, July 4 (Reuters) - Rising asset prices and borrowing costs are clouding the outlook for real estate investment trusts (REITs) in Asia, even as more of these
securities list on the region''s stock exchanges.

Intensifying competition for ever-pricier property is expected to squeeze REIT dividend payouts to investors and spark
a consolidation among the nearly 100 REITs in Asia worth a
combined $79.6 billion.

"There''s too much money chasing too fewquality assets. The
early and easy gains for REITs have already been made," said
Christopher Wong, an investment manager at Aberdeen Asset
Management, which manages $4 billion in Singapore.

REITs have only caught on in Asia over the last six year as
more of the region''s property firms embrace them as a way to
divest their assets and raise return on equity. Investors see the
trusts as a cross between bonds and equities with regular
dividends and capital appreciation gains.

But asproperty values soar, REIT managers are finding it
harder to compete against private equity players for assets and
yet pay ever-higher dividends to investors. 

REITs in Japan -- the largest market for the securities in
Asia -- offered an averag weighted yield of 2.94 percent in
June, down from about 3.5 percent a year ago. The yield on Japan
10-year government bonds  is around 1.9 percent.

"Instead of portfolio growth, REITS will have to rely on
rental increases to boostreturns. But rents can be raised only
when their tenants renew their leases," said Singapore-based
Daiwa Investment Research analyst David Lum.

DUE TO COOL OFF 
Though low, regional interest rates have begun to edge up --raising acquisition costs for REITs and also making other yield-paying instruments such as bonds more attractive.

Hong Kong REITs -- already seen by sceptical investors as a
way for local developers to offload second-rate buildings at
over-the-marketprices -- trade on an average yield of about 5
percent based on 2007 forecasts, just 25 basis points above bids
of 4.75 percent for 10-year Hong Kong dollar bonds.

Singapore REITs are trading at an average yield of about 3.9
percent,down from 5.9 percent in August, and compared with
around 2.9 percent on 10-year Singapore bonds.

The spread between the average yield on Japanese REITs
<.TREIT> and the yield on 10-year Japanese government bonds
shrunk to 100 basispoints from about 200 basis points from a
year ago, said Takashi Ishizawa, chief analyst at Mizuho
Securities fixed income group in Tokyo.

"REITs units were sold when the spread narrowed below 100
basis points. The 100 basis points seems to bewhat investors now
see an appropriate spread," he said.

Goldman Sachs recently downgraded its outlook on Japanese
REITs to ''neutral'' -- recommending a ''sell'' on DA Office <8976.T>
Investment --saying that the rise in office rents would not be "strong enough to negate rising interest rates".

For some, REITs across Asia are already overvalued -- Hong
Kong REITs trade at an average of 1.3 times above net asset value
(NAV) while Singapore REITs trade at between 1.1 to 3 times NAV.

"(Asian REITs) have done exceptionally well but they are due
for a cooling off. At this point in the cycle, we would be
looking to go relatively underweight on them relative to other
property stocks," said Lok So, a fund manager of Henderson Investors'' Asian Property Equities which has $1.5 billion
invested in Asia-Pacific.

"CRITICAL MASS"

While REITs will enjoy the underlying support of pension-fund
investors looking for stable -- rather than stellar -- returns,
trustswith the flexibility to expand beyond their domestic
markets will have an edge.

"(Investors) are likely to be more receptive to more exotic
REITs, including cross-border, multi-sector and non-conventional
sector REITs," said Michael Smith, Goldma Sach''s head of Asian
real estate.

Consolidation pressures will also grow as asset acquisitions
become harder and investors grow more finicky, Smith said.
    "We''re getting to a critical enough mass."

Major impediments to mergers andacquisitions (M&A) within
the Asian REIT sector include the lack of clear rules on such
transactions and regulatory hurdles. 

But regional jurisdictions have begun to pave the way for
REIT M&A to take place --last month, Singapore spelt out its takeover code for the sector.

"This move is significant as it means that there is clarity
on M&A rules on Singapore REITs," said Winston Liew, senior
analyst at OCBC Investment Research.

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KK


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28 Jun 07

Mapletree full-year profit soars to $1.07b on revaluation gain

The Temasek subsidiary also unveils plans to launch more Reits on SGX this year

TEMASEK Holdings' Mapletree Investments has topped the billion-dollar mark in earnings for the year ended March 31, 2007, thanks to a huge $971.2 million net revaluation gain.

The Singapore investment company's subsidiary also revealed in its latest annual report plans to launch more real estate investment trusts (Reits) on the Singapore Exchange (SGX) this year.

Mapletree - a Singapore real estate company with an Asian focus - reported a profit after tax and minority interests of $1.07 billion, up from the previous year's net profit of $144.54 million. But without the $971.2 million net revaluation gain, operating profit was still up $31.8 million or 41 per cent at $109 million, with the boost coming from the positive market outlook in Singapore.

The group's $971.2 million net revaluation gain was a quantum leap from the previous year's $1.04 million. This increase was mainly contributed by VivoCity, which was completed in October 2006, as well as the increase in value of Mapletree's other commercial properties, mostly offices.

The Reits that Mapletree plans to launch on SGX include Mapletree Commercial Trust with the VivoCity mall as the anchor asset and with revenue streams from office, retail and entertainment properties in Singapore. The group, which aims to be a leading real estate capital management company, is also in discussion with Indonesia's Lippo Group to co-manage an Indonesia-focused shopping mall Reit, Mapletree Investments' chairman Edmund Cheng said, without elaborating, in his annual report message.

Market watchers reckon that VivoCity itself, with about one million square feet net lettable area, could be worth more than $1.6 billion and that the group could also inject into the proposed Mapletree Commercial Trust its other nearby properties such as St James Power Station, HarbourFront Centre (formerly World Trade Centre), Mapletree's stakes in HarbourFront Towers One and Two office blocks, PSA Building and PSA Vista. The combined value of the entire portfolio, including VivoCity, could be around $3 billion, say industry observers.

As for the Indonesia-focused mall Reit venture with Lippo, market watchers note Lippo controls 40 malls through its various units. An industry player says it makes sense for Lippo to partner a proven name in the Singapore Reit business if it wants to list a shopping centre Reit in Singapore.

The group's commercial property portfolio includes HarbourFront Centre, HarbourFront Towers One and Two (Mapletree owns 61 per cent of the two buildings), Keppel Bay Tower (30 per cent), SPI Building, St James Power Station, PSA Building and PSA Vista. Mapletree's industrial property portfolio includes Tanjong Pagar and Pasir Panjang distriparks and Alexandra Distripark (including The Comtech, a high-tech industrial building).

In all, the group's investment's properties were valued at $3.72 billion as at March 31, 2007, up from $1.83 billion a year earlier. However, properties under development fell from $569.7 million to $157.7 million due to the re-classification of VivoCity property from 'properties under development' to 'investment properties' at market valuation upon its completion late last year.

Mapletree's operating profit rose from $77.2 million for financial year ended March 2006 to almost $109 million in FY March 2007 on the back of a 34.7 per cent jump in revenue to $216.6 million. The higher revenue was due mainly to the opening of VivoCity, as well as improved occupancy and rental rates achieved by the group's other properties. This was partly offset by loss of revenue from properties that were injected into Mapletree Logistics Trust (MLT). The group's revenue was also boosted from higher fee income, contributed mainly by the SGX-listed MLT. The group also received a new fee income stream from one of its new funds - the privately held Mapletree Industrial Fund. Fee income accounted for 9 per cent of the group's revenue for FY March 2007, up from a 5 per cent share for FY March 2006, reflecting Mapletree Investments' expansion into the capital management business.

In line with the improved performance, Mapletree Investments' return on equity rose from 6 per cent in FY March 2006 to 37 per cent in FY March 2007. Return on total assets also increased from 6 per cent to 30 per cent over the same period.

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19 Jun 07

A nice, Reit sheen for Stamford Land

SEVEN years after he first decoupled his Hai Sun Hup Group into Singapore Shipping Corporation (SSC) and Stamford Land Corporation, and less than a year after decoupling SSC's logistics operations, Cougar Logistics Corporation, former tongkang operator Ow Chio Kiat is feeling itchy again.

He recently told shareholders he was thinking of putting all his hotels into a real estate investment trust (Reit) to bring about better shareholder value.

Mr Ow has proved more than once that he is able to unlock shareholder value. Before he separated Hai Sun Hup in 2000 into its marine-related businesses under SSC and property under Stamford in 2000, the market capitalisation of the single listing was about $216 million. SSC was worth just about $200 million before Cougar was spun off.

Today, the combined market capitalisation of the three listed companies is over $800 million, and this year they distributed over $100 million to shareholders. But if you ask Mr Ow, he will say that the group is still undervalued.

Not true value

Stamford Land, with a market capitalisation of over $500 million, at present has seven hotels in Australia and one in New Zealand which are not reflecting their true value since, under current accounting rules, this has to be depreciated.

The hotels in Sydney, Melbourne, Adelaide, Brisbane and Auckland are among the best in Australia and have won numerous accolades there and from abroad. Yet, because of strange accounting rules, shareholders cannot really comprehend their true worth.

The eight hotels - five purchased in the mid-1990s and the remaining three in 2000 - were bought for a total consideration of about A$480 million. Their book value after depreciation is now about A$388 million (S$504 million) and still heading south.

In a Reit, properties are revalued annually and the same hotels could now be worth A$700-800 million, allowing unit holders a better grasp of their assets.

Putting aside their capital appreciation, shareholders will still reap significant gains from the appreciation of the Aussie dollar, which was around S$1.05 in 2000 and is now hovering around S$1.30.

However, for shareholders to gain the full benefits of a Reit, Stamford wants to acquire a property in Singapore. It could then maximise its borrowings, and as the interest expenses can be offset against Australian hotel profits, benefits would be significant. Through efficient tax management, the Reit company will be able to optimise its returns.

Stamford recently bid $200 million for the 398-room Novotel Clarke Quay but was pipped by Kwek Leng Beng's CDL Hospitality Reit, which offered a million dollars more and assumed debts totalling $18.8 million.

Although disappointed with the outcome of its initial foray into the local property market, Stamford - which has a cash hoard of around $80 million - is still on the lookout for a prime hotel property here.

For Stamford, putting its hotels into a Reit will make it asset-lighter, but hopefully with plenty of cash from listing the Reit to enable it to expand further into property development in Australia and New Zealand. The plans are for it to retain a substantial stake in the Reit.

At present, Stamford has several high-end properties under development. This year, it is expected to book the profits from the sale of its remaining 22 residential units at its Stamford Marque in Sydney. As at yesterday, there was only one apartment left for sale. In the last financial year, it sold 61 units for pre-tax profit of $13.6 million and $85.2 million in revenue.

Choice site development

It is now developing another choice site near The Rocks - Sydney's old town quarter. The development, which will be launched in the third quarter of this year, will comprise 129 apartments with a total saleable area of 17,360 sq m and 1,474 sq m of commercial space. Other developers are said to have offered double the A$22 million Stamford paid three years ago for the site.

In Auckland, the Albert Residences, comprising 149 residential units above the Stamford Plaza hotel, are expected to bring in much riches as there was no land cost or foundation-laying costs involved.

And in the hot office market of Perth, the company is building a 14-storey office block in the city centre, with a lettable area of 14,000 sq m.

Also, it is still looking for other choice development sites in the key cities of Australia. With all these things going on, Stamford Land is worth another look.

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14 Jun 07

A chance to strengthen the S-Reit market

THE much awaited announcement by the Securities Industry Council (SIC) that the Singapore Code on Takeovers and Mergers will apply to Reits (real estate investment trusts) came late last week. This makes a consolidation in the Singapore Reit (S-Reit) sector easier, although there are unlikely to be many immediate mergers.

The run-up on the Singapore Exchange (SGX) in the past year has eased the pressure on even the poorer-performing Reit managers. It would have been a different story had the takeover code been extended to Reits last year. Back then, some S-Reits were trading below their initial public offer issue price, putting pressure on those Reit managers seen as not delivering returns to unit holders, and making their Reits ripe for takeover by rival trusts. The stock market will inevitably quieten down at some stage, renewing the pressure on the weaker Reits.

Another point to note is that Reits are relatively new instruments to investors here. The first Singapore Reit, CapitaMall Trust, was floated just five years ago.

CapitaMall Trust is run by a strong management team that has delivered growth, which has helped enchant local investors with the idea of Reits as a class. Some new Reit issuers, even those with weaker growth stories and managements, have been able to ride on this positive sentiment. As the S-Reit market matures, however, investors will become more discerning, with the smart money leaving some of the less well-run Reits.

As the unit prices of such Reits fall, they will become more liable to takeover.Potential Reit acquirers will have to be sure of improved results from a merged company, possibly by extracting greater value from the assets of the Reit they take over. If this does not happen, the merged Reit could itself be a takeover target.

Mergers and acquisitions (M&As) among S-Reits will become inevitable only when saturation point is reached and there are no further growth avenues for Reits other than acquiring rivals. That has been the case in markets like Australia.

As Goldman Sachs said in a note this week: 'Singapore's Reit market . . . is still relatively young and has abundant opportunities to acquire (properties) in Singapore and abroad . . . Singapore Reits, many with developer sponsors to provide a pipeline of acquisitions, are far from reaching a point where the potential to grow assets substantially can only be via M&As.

'The investment bank does not expect M&As to be a major theme in the S-Reit market over the next 12-18 months. Indeed, it expects more new Reit listings and secondary equity raisings to fund asset acquisitions to be the major theme for the rest of 2007 and in 2008.

In the longer term, though, Goldman Sachs does see consolidation as a major theme.This could be in the form of bigger players making hostile raids on smaller players or Reits merging to bring about economies of scale. There may even be parties that could attempt to take public-listed Reits private. Goldman Sachs suggests that Reits with fragmented shareholdings - such as Suntec Reit or MacarthurCook Industrial Reit - could become potential takeover targets.

Market watchers reckon that one factor that could fuel M&A activity in the S-Reit sector, even in the short term, is the sheer liquidity being created by overseas investors keen to get their hands on a piece of the action in the Singapore real estate sector.

A consolidation of the S-Reit sector, when it takes place, could mean a higher quality of S-Reits. But even with mergers, new Reits will still be created. Many players are keen on floating Reits here, given the tax savings - Reits do not pay corporate tax at the vehicle level if they distribute all their income to unit holders. That has created a great financial incentive for property owners to put their assets into Reits.

This rule, and other Singapore Reit guidelines, are seen as making these property trusts among the most attractive in the world.In either case - the merger of existing Reits or the creation of new ones - there will be handsome fees for the investment banks, in addition to the fees for the Reit managers themselves.These factors provide fertile ground for breeding S-Reits of varying quality - but a consolidation leading to weaker Reits being acquired by stronger players will strengthen the S-Reit market.

Last Friday's announcement sets the stage for that.

-- Edited by KK at 19:19, 2007-06-14

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9 Jun 07

SIC extends takeover and merger code to cover Reits

Move to protect interests of both minorities and major unit-holders

FROM now on, anyone who takes control of 30 per cent or more of a real estate investment trust (Reit) will have to make a mandatory general offer to the rest of the unit-holders.

The Securities Industry Council (SIC) announced yesterday that it has decided to extend the Singapore Code on Takeovers and Mergers - which currently governs only listed companies and those with more than 50 shareholders and net tangible assets of $5 million or more - to property trusts structured as collective investment schemes.

The local securities industry watchdog said its decision was in line with existing rules in Britain and Australia where property trusts are subject to takeover provisions.

'The application of the code to Reits would not only protect the interests of minority investors but also that of the incumbent controlling unit-holders,' the SIC said in a statement yesterday.

It further explained that in the absence of a proper framework governing takeover and merger transactions of Reits, a party would be able to accumulate effective control of a property trust without having to make a general offer.

'Under such circumstances, incumbent controlling unit-holders might not be able to extract a control premium from such party. A proper framework that ensures the fair and equal treatment of all unit-holders would enhance the reputation of the Reit market in Singapore and add to its growth,' it added.

It also pointed out that concerns relating to proper governance and accountability are equally applicable to Reits. 'In the opinion of SIC, there is no strong basis for not extending the code to Reits,' it noted.

The Monetary Authority of Singapore, on the advice of the SIC, will introduce the appropriate changes to the Securities & Futures Act and the code.

Until then, the SIC has advised parties engaged in takeovers or mergers involving Reits to comply with the code. This relates particularly to parties intending to acquire 30 per cent or more of a Reit; or those already holding not less than 30 per cent but not more than 50 per cent and acquiring more than one per cent of a Reit in any six-month period. The main rationale for the takeover laws is that if there is a change in management, the minority shareholders must be given a chance to opt out.

The securities market here is regulated on the basis that all shareholders must be treated equal; there must be sufficient information to shareholders to enable them to decide on the merits of a takeover or merger; there must be a fair market at all material time; and the offeree company must not take action that will frustrate the offer.

Singapore's Reit market - the third-largest in the Asia-Pacific after Australia and Japan - has grown to more than US$18 billion, boosted by about 20 trusts containing assets ranging from Indonesian hospitals to Chinese shopping malls.

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Extracted from DMG Daily

Japan firm plans to list Reit in S'pore

Tokyo-based real estate fund manager Re-plus Inc is in talks with bankers to list the first Singapore property trust backed by a Japanese sponsor.

Re-plus wants to list a real estate investment trust (Reit) that would include two Chinese office buildings worth at least US$400 million. Situated in Beijing, the buildings are the only overseas assets in Re-plus's portfolio, which is valued at about 270 billion yen (S$3.4 billion).

According to a banker, The portfolio has not been finalised yet. They are in talks with several banks now, but the trust could come to the market early next year. Re-plus, valued by the market at US$482 million, already manages Re-plus Residential investment, a Reit based on rents collected from its apartments in Tokyo.

Bankers said that Re-plus wants to list its Reit in Singapore because Japanese-listed property trusts are not allowed to own foreign assets. Singapore's Reit market - the third-largest in the Asia-Pacific after Australia and Japan - has grown to more than US$18 billion, boosted by trusts containing assets ranging from Indonesian hospitals to Chinese shopping malls.


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KK


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thestar, 4 Jun 07

TA plans RM1.2bil REIT on SGX

TA Enterprise Bhd will list its real estate investment trust (REIT) in Singapore by year-end with an initial fund size of around RM1.2bil.  

Executive chairman Datin Alicia Tiah said the group was currently working on the listing of its REIT on Singapore Exchange Ltd (SGX).  We have been talking with our merchant banks and relevant parties for the listing exercise. Hopefully we will be able list our REIT by year-end. It is just a matter of timing, Tiah said in an interview. 

She said this would be a very good time to go for a listing with the current bull market. She added that REIT would be a good way for the company to unlock its property value.  We believe Singapore is the best location for our listing exercise as the Singaporean market provides better valuations. The REITs listed on the SGX are doing very well, and the approval period from the regulators is shorter, she explained.  

Tiah said more properties could be injected into its REIT, but TA Enterprise would begin with three properties.  The REIT would include The Radisson Hotel in Sydney, its commercial building in downtown Vancouver in Canada as well as Menara TA One in Kuala Lumpur.  We will have a good combination of REIT because we will have a hotel as well as commercial buildings. I think investors will like it, Tiah said. 

She said the cash raised through the REIT would go towards the funding of its ongoing development projects as well as upcoming projects.  TA Enterprise expects to unlock more than RM500mil and would use the money generated to buy more properties in China and Vietnam or enlarge its landbank locally. 

On its overseas expansion, Tiah said TA Enterprise was currently conducting feasibility studies for ventures into Vietnam and China.  Vietnam and China will offer good opportunities. We have been discussing with some potential partners in Vietnam, but it is still at the preliminary stage, she said.  She added that TA Enterprise would like to tap the stock broking and property market in Vietnam. 

TA Enterprise is expected to use Hong Kong, in which it already has a presence, a stepping stone to penetrate the huge Chinese market.  We will venture into the property market in China for the moment before deciding to tap into the Chinese stockbroking industry.  We will take it one step at a time. We'd rather be safe than lose any money, Tiah said. 

TA Enterprise plans to introduce new services in Malaysia in the second half of 2007 and is currently waiting for licences from the local authorities.   The stockbroking company will introduce services such as corporate advisory work and issue-structured products such as call warrants and exchange-traded funds, as well as go into venture capital lending. 

According to Tiah, the company is currently preparing for the launch of Idaman Bintang, a residential and commercial development.  The project, which has a gross development value of RM1bil, sits on a three-acre freehold site at the intersection of Jalan Imbi and Jalan Bukit Bintang.  Idaman Bintang will have three towers. We will be selling two towers and keep one to generate recurring income, she said. However, she did not specify other details like the built-up areas and timing of the project.   The project (Idaman Bintang) has attracted a lot of interest even before the plan is approved, Tiah said, adding that she believed that TA had a competitive advantage. 

She said the company was also planning to build another two towers - TA Three (60 storeys) and TA Four (35 storeys) on the land adjacent to the existing Menara TA One at Jalan P. Ramlee, Kuala Lumpur.  The towers are just across the road from Kuala Lumpur City Centre.  Tiah said the project would consist of about 300 units of 6-star hotel service apartments, offices and retail spaces. 

On the company's financial performance, Tiah said she expected all its business segments to turn in a better performance for the current financial year ending Jan 31, 2008.  Barring unforeseen circumstances, the company is expected to perform better this year due to the positive sentiment of the stock market as well as the property sector, she said.  Although we have not announced our first quarter results, I can assure you that they'll be very commendable results.  

Tiah added that TA Enterprise would also adopt its first ever dividend policy to pay its shareholders consistent yearly dividends of between 40% and 60% of the group's net profit.  For the financial year (FY) ended Jan 31, 2007, TA Enterprise posted a net profit of RM133.7mil on revenue of RM354.5mil, compared with RM80.7mil and RM312.8mil respectively in FY06. 

To a question, Tiah said it did think about privatising the company when its share price was trading way below its net tangible assets (NTA) level.  TA Enterprise was trading at 88 sen early of the year and the thought of privatisation came because the trading price then was not attractive, she said, adding that its share price was still trading below its NTA level.  Tiah said she might consider a privatisation if the share price go below its intrinsic value.

TA Enterprise's share price has gained over 110% from a low of 77.5 sen on Jan 11, closing at RM1.63 last Friday. The counter was the most heavily traded counter that day with 29.3 million shares changing hands. 

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BT, 24 May 07

New $1b Reit may float by year-end

Fund manager mulls spinning off assets in ARMF

A NEW real estate investment trust owning more than $1 billion worth of assets, including suburban shopping centres - Century Square, Hougang Mall, Tiong Bahru Plaza and White Sands - could be floated here as early as Q4 this year.

Pramerica Real Estate Investors (Asia) chief executive officer Victoria Sharpe told BT that the fund manager is considering spinning off the assets in Asian Retail Mall Fund (ARMF), as one of the options for an exit strategy for investors in the fund.

The assets in ARMF, valued at slightly over $1 billion, include the Central Plaza office block next to Tiong Bahru Plaza mall. Pramerica Asia - formerly known as GRA Singapore - manages the ARMF and its sequel fund ARMF II. ARMF, which has a total equity size of $320 million, is fully invested, and ARMF II, with US$400 million equity size, is nearly 80 per cent invested.

The second fund's property portfolio includes Liang Court Shopping Centre, which is undergoing a $45 million refurbishment, and a new $450 million mall, Tampines 1, being built next to Tampines MRT Station.

The two funds have some common investors, including Pramerica-linked entities, three big Dutch pension funds and Singapore-listed Guthrie GTS. NTUC FairPrice invested in the first fund but not the second. The second fund also has some new investors.

Pramerica Asia also manages Asia Property Investment Fund (ASPF) with an equity of 655 million euros (S$1.35 billion) which is fully invested. This is a Pan Asian fund with a property portfolio in markets including Japan, China, Singapore, Korea, Hong Kong, India and Thailand. The fund has a half share in the Jurong Point extension development and Centris residential project in Singapore.

Investors in the fund include German insurance companies and pension funds, as well as investors from the Gulf region.

These three funds - ARMF, ARMF II and ASPF - hold eight properties in Singapore, with about 1.7 million sq ft net lettable area, valued at more than $2.4 billion. Singapore is the biggest of the firm's Asian investment markets. Pramerica Asia is currently raising capital for ASPF II with a target equity size of one billion euros, which it expects to finish raising by the end of this year, Ms Sharpe said.

The follow-on fund will probably target the same Asian countries for property acquisitions, she said.

Pramerica Asia-managed funds generally have gearing of about 60 to 70 per cent.

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11-May-07

JTC seeks Reit manager for its planned divestments

JTC Corporation has begun its search for a real estate investment trust (Reit) manager as part of a move to divest its high-rise ready-built properties.

Following news last year of its decision to divest these properties through a combination of a Reit and trade sale, JTC yesterday announced its launch of a Request for Proposals (RFP) to explore the appointment of a Reit manager.

JTC CEO Ow Foong Pheng said: 'The RFP is expected to provide a rigorous process for us to find a suitable and qualified Reit manager. One of the objectives of our divestment exercise is to promote active competition in the industrial property market in Singapore so that existing and prospective tenants may benefit from more options and choices.'

JTC said that emphasis will be placed on Reit managers who have a proven track record of managing a listed or unlisted industrial Reit or property fund globally; or a listed or unlisted Reit or property fund in any sector in the Asia-Pacific region. The deadline for the RFP submissions is June 1.

Issues that could arise from this divestment are the impact on the competitiveness of the industrial property market as well as price stability and fair market value of the divested properties.

The properties it is divesting have a total net floor area of 1.7 million sq m. They consist mainly of flatted factories, ramp-up and stack-up factories, a warehouse building and three office blocks in the International Business Park and the Changi Business Park.

It is not known what properties JTC intends to put in a Reit. Market watchers have also pointed out that some properties will be more attractive than others.

Savills Singapore's director of industrial business space Dominic Peters also notes that there could be issues pertaining to the number of years left on leases of certain properties. However, Mr Peters said that the strategy to 'bundle' properties together could be effective in averaging out the valuations of properties that are less attractive. He reckons the key properties in the Reit will be the buildings in the business parks. 'Any Reit manager will want to include these because the occupancy is very high,' he added. But he also highlighted that the three business park buildings only account for about 5 per cent of the portfolio being divested.

On whether JTC could have considered launching a Reit on its own, CB Richard Ellis Research executive director Li Hiaw Ho said: 'An experienced Reit manager will be able to import best practices to the JTC Reit and, in turn, ensure that the properties are better managed. This will benefit both the tenants and unit holders of the Reit.'

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Singapore's Reit sector has room to grow: UBS

Reit listings here expected to rise in next 12 months

IF you think Singapore's real estate investment trust (Reit) sector has reached its full potential, think again. Though the local market can rightly claim to be Asia's most developed, it still has considerable room to grow, according to James Fleming, UBS head of equity capital markets for South-east Asia.

The potential is not just in real estate. Infrastructure trusts are even less developed and have immense potential, and many sizeable corporates are seeking cross-border listings, says Mr Fleming. But the biggest trend, for now, is in real estate.

UBS was the leading player in terms of raising equity capital in 2006, according to Dealogic, and has been involved in several Reit listings, the most recent being that of MacarthurCook Industrial Reit.

What Mr Fleming has observed is a lot of activity happening out of the public eye. Many South-east Asian companies are seeking to sell assets to lighten their balance sheets. Private funds buy the assets and lease them back, warehousing and pooling them. In time, even though it is more difficult in Asia's fragmented markets than in the US or Australia, these private funds will be merged, and the asset pool securitised into a Reit and sold to the public.

According to UBS, less than one-tenth of Singapore property is securitised, a fraction compared with the US or Australia, where the proportion is closer to three-quarters. 'The Asia real estate paradigm has just started. We are at the tip of the iceberg,' says Mr Fleming. His colleague Patrick Lee, who heads the Singapore and Malaysia investment banking team, expects the number of Reits listed in Singapore to rise substantially in the next 12 months.

The same is happening with infrastructure, another sector with low penetration. Again, private funds are acquiring assets to structure a public fund later on. Investing in infrastructure has become a cliche, yet there are virtually no publicly listed Asia-focused infrastructure funds, save for Temasek's CitySpring.

Currently, private equity is prepared to pay far higher multiples, up to 23 times earnings before interest, tax, depreciation and amortisation (Ebitda) on a recent infrastructure deal, according to Mr Lee. Says Mr Fleming: 'If I were an infrastructure operator and wanted to monetise, I would seriously consider public versus private valuations today.' He also says widespread economic growth has led to a broadening of the IPO pipeline over the last six to nine months to include every country in South-east Asia and most sectors. Mr Lee anticipates a growing number of cross-border listings of international, 'boundary-less firms', like last year's BanyanTree.

While the Singapore Exchange (SGX) may still find it challenging to attract government-linked 'national champions' from other countries, it is just a matter a time before it attracts sizeable listings from Vietnam, the Philippines, or other countries, says Mr Fleming. This includes large Chinese firms. After Yangzijiang, China's fourth-largest shipbuilder, raised over $1 billion in capital last month, UBS has received several enquiries from other Chinese firms in other sectors of similar size, according to him.

Yet upcoming deals could be barely enough to feed global appetite for Asian issues, with liquidity driven by cash-generating growth and exacerbated by a less obvious switch in asset allocation by US investors away from their home market and towards high-growth economies abroad.

'People look at a deal and say, yeah, I want 5 per cent. The dollar amount is academic,' says Mr Fleming. 'The biggest complaint we get is: we want more stock.' Many deals are too small for large portfolio managers, who need to acquire holdings that are large enough to impact their portfolios. For example, he recalls an Asia-based hedge fund with US$3 billion, of which only US$2 billion was deployed.

The excess cash could be comfortably levered up - and they're not a massive fund, he says.

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India's Embassy files for S'pore Reit IPO: sources

(MUMBAI) Indian property developer Embassy Group has filed with the Singapore stock exchange to launch a US$150 million initial public share offer for a property trust spin-off, sources familiar with the deal said yesterday.

The real estate investment trust, or Reit, will be the first in Singapore based purely on assets in India.

The trust, which is expected to list before June, will be managed through a joint-venture partnership with Singapore's Mapletree Investments, a unit of state investor Temasek Holdings, sources told Reuters earlier this month.

While the initial fund-raising target is relatively small, Embassy's Reit aims to grow by acquiring assets from its Bangalore-based parent in the future, one of the sources said. Indian real estate values have soared amid the country's booming economy and acute shortage of housing and infrastructure.UBS and Goldman Sachs are sponsoring the deal.Embassy develops residential, retail and office property. It has built three business parks and has nine retail and office buildings. - Reuters

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Business Times - 23 Apr 2007


S'pore Reits market is largest in Asia outside Japan: minister

SINGAPORE - Singapore's real estate investment trust (Reit) market has become the biggest in the Asia Pacific region outside Japan, Trade and Industry Minister Lim Hng Kiang said on Monday.

Since the first Reit listing in 2002, Singapore now has 16 listed Reits with a total market capitalisation of $26 billion (US$17.22 billion), he said in a speech to a property conference.

This makes it 'the largest Reit market in Asia outside of Japan,' he said, without giving a size of the Japanese market.

'Singapore Reits offer investors access to a diversity of real estate assets including retail malls, office buildings, industrial properties and serviced apartments,' Mr Lim said.

In 2006, Singapore saw its first dedicated hotel Reit and Asia's first healthcare Reit, said Mr Lim, who is also deputy chairman of the Monetary Authority of Singapore, the republic's central bank. -- AFP

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News that will affect Reit that have offices under their  portfolio.

Average monthly rent for offices in the Suntec, Marina Centre and City Hall area surged 37 per cent quarter on quarter in Q1 to $10.90 per sq ft, outstripping a 28 per cent gain in the Raffles Place area. The Suntec, Marina Centre and City Hall micro-market was relatively under-priced compared with the Raffles Place area during the runup in office rents last year and is catching up now. Average monthly rent in the Shenton Way and Robinson Road area rose 19 per cent quarter on quarter to $7.90 psf, while that in the Orchard Road area increased 9 per cent quarter on quarter to $8 psf. Average Grade A office rents maintained a chronically strong upward trend, charging ahead another 21 per cent quarter on quarter to $9.80 psf.


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5-Apr-2007

Property (REITs)

Highest Yields From Industrial Segment

Recent price movements warrant a relook at REITs. A comparison of yield spreads of the office, retail and industrial segment shows that relative attractiveness of the some of the REITs have shifted. The best average yields lie with the industrials.

Office and retail yields driven down. Interests in the office and retail REITs on the back of strong demand in the segment have kept the yields relatively lower. Yield spreads with the 3-mth interbank rates are at a level of 0.13% and 0.28% respectively. For the two segments, it is a case of catching up with the possibility of further rental reversions and asset enhancements for yield improvements.

Since the release of the last report, changes to the price movements have surfaced some interesting REITs which were less attractive before. Macquarie Meag Prime REIT (MMP) emerged, stretching to the top end with a yield of 4.87%. Although Allco Commercial REIT (Allco) appears to look attractive with the highest yield of 4.57% in the office segment, its portfolio includes assets in Australia which has a risk-free rate of 5.89%.

Industrial REITs have the best yields. Yield spread of the industrial REITs is the highest amongst the different segments at 1.64%, and has more than doubled since the beginning of the year. We do not deny that the high premium of industrial REITs could be due to risk perception, however, there are some quality ones which should qualify for a much lower risk premium. Amongst the industrial REITs, we are of the view that Ascendas REIT (A-REIT) and Mapletree Logistics Trust (MLT) are the two quality REITs where yields are very attractive. In the case of Cambridge Industrial Trust (CIT), the quality of the assets and tenancy are a mark below.


-- Edited by KK at 00:33, 2007-04-27

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Extracted from UOB Kay Hian

Investment Case for REITs
Resilient fundamentals in a volatile market. Despite the volatility in the equity market, the REITs market should continue to draw interest and investors will look to micro fundamentals for stock picking. Other performance factors are likely to come fromasset acquisitions and enhancements. Companies with superior managementcapabilities and other asset enhancement potential could interest investors andoutperform the pack with quality attributes such as established track records, large and diversified portfolios (segment or geographical focus), better tenant profiles or stronger parental support. Purely from a straightforward yield point of view, the following are points of interest:

With peaking of interest rates, REITs will offer higher yields. We are of the view that interest rates have peaked and should be coming off, resulting in REITs looking attractive in terms of yield and lower cost of funding for acquisitions. Office and industrial REITs are likely to benefit the most and retail REITs the least as retail leases usually include a variable rent component dependent on tenants' sales. Our sensitivity analysis indicates that for every 1% fall in interest rates, REITs yields should fall marginally by 0.27%.

Defensive play: Stable income due to locked-in leases. Given the lag effect of rental reversions by 2-3 years (depending on the underlying lease structure of tenants) as a result of locked-in leases, we see REITs as a defensive play with resilience to market weakness. This provides protection against any possible short-term weakness in rentals during the locked-in period. In addition, structured leases with built-in incremental rental reversions will ensure that REITs will not miss out on any rental upcycle.

Interesting REITs on our watchlist: A-REIT (5.48%), Suntec REIT (4.15%), Ascott Residence Trust (3.18%).

http://research.uobkayhian.com/research/content.show.action?filename=2007032214573697657335586.pdf

-- Edited by tfwee at 22:47, 2007-03-24

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BT, Published March 22, 2007

6 more Reits expected to be listed by June

MacarthurCook lodges preliminary prospectus for industrial Reit

ANOTHER six real estate investment trusts (Reits) could be listed here by June, said Peter Mitchell, chief executive of the Asian Public Real Estate Association (Aprea).

'Singapore has 15 Reits now, but there are more in the pipeline,' said Mr Mitchell in an interview. 'There will be six more by June, and more by the end of the year.'

One of the six Reits looks set to be MacarthurCook Industrial Reit (MI-Reit), which lodged its preliminary prospectus with the Monetary Authority of Singapore (MAS) yesterday. Others could include one comprising China assets, and another one with assets in India, Mr Mitchell said.

Australian-listed MacarthurCook has been buying industrial properties in Singapore over the past few months to inject into the Reit. Among its purchases was the $115 million warehouse complex UE Tech Park, which it bought from listed United Engineers in December last year.

The filing to MAS said that MI-Reit will consist of 12 industrial properties in Singapore worth $316.2 million at the time of listing. The properties have a total net lettable area of about 195,000 sq m.

Right now, all the Reit's assets are in Singapore, but it will pursue acquisition opportunities across Asia, the filing said. It added that the Reit is targeting to grow by up to $500 million in new investments per year, focusing primarily on Singapore, China, Hong Kong, Malaysia, Japan and India.

Other than MI-Reit, Mr Mitchell said that a Reit with assets based in China is due to be listed here in the first half of the year. More such Reits - those with China assets - could follow, he said.

And also by June, Singapore will probably see a Reit with assets based in India making its way to the Singapore Exchange. Previous media reports have said that business park developer Embassy Group plans to spin off buildings in a Singapore listing.

Aprea, which aims to promote, represent and develop the publicly traded real estate sector in the Asia-Pacific, was set up in 2005, and now has close to 90 members, including CapitaLand, Mapletree and Frasers Centrepoint, as well as most of the Reits listed here.


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BT, Published January 15, 2007

Chinese Estates may shift Reit to S'pore: report

Original plan to tap up to HK$5b in HK rejected

CHINESE Estates Holdings, a mid-tier developer, may list a real estate investment trust in Singapore instead of Hong Kong as it originally planned, according to the South China Morning Post. Sources said the developer - run by brothers Joseph Lau Luen-hung and Thomas Lau Luen-hung - planned to launch the trust in Singapore this year and Citigroup was arranging the deal. The size and combination of the property assets in the trust were largely unchanged from the original plan, they said.

A year ago, Chinese Estates planned to raise up to HK$5 billion (S$1 billion) in Hong Kong through the property trust to fund expansion. However, the plan was rejected by the Securities and Futures Commission as the properties to be included were only partially owned by the company. According to the sources, the developer decided to switch the listing to Singapore this time because while the regulations are tougher in Hong Kong, investor appetite for property trusts has also cooled.

Champion Reit has slumped 24.7 per cent since its units listed in Hong Kong in May last year while Sunlight Reit, listed last month, has dropped 13.08 per cent. Prosperity Reit has fallen 31.4 per cent since the beginning of last year, and despite an 18.6 per cent gain, the Link Reit's performance still trailed that of the Hang Seng Index, which rose 30 per cent during the same period.

Jones Lang LaSalle regional director Lau Chun-kong said the Securities and Futures Commission had more restrictions on the launch of a property trust, such as whether the applicant had effective control of the property portfolio.

Chinese Estates is likely to be the second Hong Kong developer to list a property trust in Singapore, following the Cheung Kong (Holdings) shopping centre trust Fortune Reit in August 2003 that raised HK$2.23 billion. Fortune Reit is up 25.26 per cent since listing.

Chinese Estates' mainland expansion plan will benefit from any funds raised by the listing of a property trust. The developer has been aggressive in buying land on the mainland, including two sites in Chengdu, Sichuan province, for 732.3 million yuan (S$145 million) in November last year.

'The plan to launch a property trust is continuing but we cannot disclose the details at this moment,' a Chinese Estates spokeswoman said.

A conducive Reit regulatory regime and competitive tax system have favourably positioned Singapore to draw an increasing number of cross-border property trust listing, further consolidating its status as a regional Reit hub, according to a report by CB Richard Ellis.

CapitaRetail China Trust, which comprises shopping centres on the mainland, and Indonesian properties trust First Reit listed in Singapore last month and had recorded encouraging performances, the report said. CapitaRetail China Trust's institutional tranche was 196 times subscribed and its price surged 59.3 per cent on its first trading day.

In its previous plan, Chinese Estates would have injected about six investment properties into the proposed trust, including shopping centres and offices such as Windsor House's office tower and Excelsior Plaza in Causeway Bay, Wanchai Computer Centre and Harcourt House in Wan Chai, and Silvercord in Tsim Sha Tsui.



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Prime retail rent surge: No end in sight till 2009

Analysts expect rents to increase by as much as 8% next year

By Uma Shankari
Dec 25, 2006
The Business Times

(SINGAPORE) The upward spiral of prime retail rents will continue next year, and possibly beyond.

Property consultants and analysts said that after rising 4 to 5.3 per cent this year, prime shop space rents could surge as much as 8 per cent next year as supply remains tight.

Even mega-mall VivoCity, which officially opened its doors earlier this month with 1.1 million sq ft of lettable area, did little to cool rents.

Demand has been so strong that additional space from new shopping centres and extensions to existing malls had also been soaked up. Retail complexes which increased their space included Centrepoint, which added a new wing comprising 58,000 sq ft.

CB Richard Ellis (CBRE) said its islandwide prime rental index is expected to end 4.3 per cent up in 2006, the biggest increase in five years. 'Average prime rent in Orchard Road in the first quarter of 2006 was $33.30 per sq ft per month (psfpm). It is now $34.50 psfpm,' said Mavis Seow, director for retail services at CBRE.

And looking ahead, retail rents are expected to grow at an even faster clip as there will hardly be any new supply of retail space coming up until 2009 - when Orchard Turn is expected to be completed, followed by the completion of two other developments in Orchard Road by developers Far East Organisation and Land Lease.

This means rental increase next year could outstrip this year's, with estimates for 2007 ranging from 4-8 per cent.

'For the whole of 2007, supported by the Singapore Tourism Board's (STB) positive outlook, rental growth should remain in the region of 4-4.5 per cent,' said Chua Yang Liang, Jones Lang LaSalle's (JLL) head of research. Rentals should also be boosted by increased retail takings next year, as most landlords take a percentage cut of their tenants' gross turnover, Dr Chua said. Retail sales are expected to climb next year on the back of an improving economy.

The good news for landlords - and probably not so good news for tenants - is that rents are expected to climb even past 2007. Macquarie Research, for one, expects increases of 5-8 per cent a year until 2009.

But it expects growth to slow down thereafter with new space coming onstream along Orchard Road, and when retail space in the two upcoming integrated resorts kick in. The two resorts alone will add about 1.3 million sq ft of retail space.

Other than a slowdown in rental growth, landlords will face increasing competition once all the new developments are up, said market observers. JLL's Dr Chua said: 'New malls will have to continually differentiate themselves from the herd. We have seen the emergence of specialised malls and this trend is set to continue.'

Other new trends to emerge would include mall owners' increasing preference for smaller outfits over large anchor tenants, the addition of push carts and kiosks in malls, an increased food and beverage (F&B) component in shopping centres and the development of more niche F&B enclaves all over the island, said Tay Huey Ying, director for research and consultancy at Colliers International. Just in the past one year, places such as Dempsey Road, Rochester Park and Upper Thompson Road have become F&B havens.

As for shoppers, further variety can be expected, with more local and international brands making their way to Singapore.

This year, Gap, Ted Baker, Pull and Bear and a few other Spanish retailers set up shop here. Next year, besides new entrants, existing international retailers are also expected to continue extending their presence through more standalone, flagship or concept stores.

Said Macquarie property analysts Tuck Yin Soong and Elaine Cheong. 'Given the lower retail space per capita in Singapore relative to other mature markets, we believe there is enough room for these new brands in Singapore.'

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BT, December 12, 2006, 1.24 pm (Singapore time)

CapitaLand to launch US$630m Sharia fund

SINGAPORE - CapitaLand, South-east Asia's largest property developer, said on Tuesday that it would raise up to US$630 million with the launch of a new real estate fund that is compliant with Islamic Sharia laws.

The company said in a statement that the fund would invest in a commercial and residential waterfront project in Bahrain. -- REUTERS



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BT, December 12, 2006, 6.02 pm (Singapore time)

Australia's MacarthurCook plans S'pore Reit

SINGAPORE - Australian real estate manager MacarthurCook Ltd said on Tuesday that it would list a real estate investment trust (Reit) in Singapore that would be based on industrial properties in the region.

Confirming an October Reuters report, MacarthurCook managing director Craig Dunstan said that the firm had acquired 10 industrial properties in Singapore so far for the planned Reit but declined to say what the final size would be. 'We think that Asia is a good place to be in terms of sourcing industrial properties and in terms of returns from the sector,' Mr Dunstan told Reuters, adding that the trust would be the company's first listed Reit.

Singapore's property trust market is the third-largest in Asia-Pacific after Australia and Japan.

MacarthurCook is separately raising about US$64 million from a secondary listing of units in its MacarthurCook Property Securities Fund. -- REUTERS



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Extracted from www.qian2yu.com

Singapore REIT: M&A theme a strong possibility in 2007/08

Summary: The S-REIT theme in 2007 is likely to be a continuation of the theme in 2006, i.e. focus on acquisitions. For the high beta REITs, they need to meet growth expectation. In a property up-cycle and with few available properties, this task is getting increasingly difficult. Some (CCT, MLT, CMT, ART) are venturing overseas, while others remain domestic focus (AREIT, Cambridge). Others opt for own development (AREIT and CMT), but this is a riskier strategy and is constraint by REIT guidelines. Going forward, with the maturity of the REIT market, a further avenue of growth is via M&A. Specifically, there is the potential for REITs with low trading yield (i.e. low cost of capital) to buy out REITs with higher trading yield, and the segment most likely to see an M&A angle is industrial REITs. This is due to the fact that this segment is most mature and has the most players (i.e. most fragmented). We see Cambridge Industrial Trust as the most likely target. The aggressor is likely to be its much bigger rivals such as AREIT, MLT or the soon to be listed JTC REIT. However, as legislation is presently not in place for at least another 12 months, we see this scenario only coming into play in late 2007 or 2008. We have BUY ratings on FCT, MLT, ART, MMP and a positive view on non-rated Allco & Cambridge though. (Winston Liew)

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BT, Published December 9, 2006

CapitaLand aims to keep the Reit ball rolling

It unveils plans for portfolio of 10 Reits within 3 years as China Reit makes sterling debut

CAPITALAND, which floated its fourth real estate investment trust (Reit) on the Singapore bourse yesterday, plans to have about 10 Reits with a total market cap of about $20 billion within three years, president and CEO Liew Mun Leong told reporters.

Its four current Reits have a combined market cap of about $9.3 billion. And the planned doubling in market cap could come not just from floating six more Reits but growing the size of the group's existing Reits - CapitaMall Trust, CapitaCommercial Trust, Ascott Residence Trust and the latest, CapitaRetail China Trust (CRCT), which began trading on the Singapore Exchange (SGX) yesterday. CapitaLand is also a cornerstone investor in Hong Kong's Link Reit.

Replying to media queries yesterday, Mr Liew said CapitaLand is also open to acquiring existing Reits listed on SGX or elsewhere - provided their assets are fundamentally sound and CapitaLand could add value to them.

He said the new Reits CapitaLand is working on will include an Islamic Reit, though he was 'not very sure' if it could be launched next year. This Reit could hold commercial properties, including malls and possibly service apartments, and is expected to be listed in Singapore. As to where these assets may be located, Mr Liew said: 'We're now studying Gulf Cooperation Council (GCC) countries. We've already started our first project in Bahrain - Raffles City Bahrain. We are evaluating more possibilities in GCC. There's also a possibility of establishing assets in Asia where Islamic funding could be a source of finance.' Bahrain Raffles City will be the retail and hospitality component of a $1 billion integrated project in a new waterfront district called Bahrain Bay announced earlier this year. CapitaLand will take a 30 per cent stake in the project, which will comprise about 2.5 million sq ft of built-up area for housing, service apartments and retail and leisure facilities.

Market watchers said that other Reits that CapitaLand could spin off down the track could include two Reits holding Japanese assets - rental apartments and shopping centres - going by the group's investment activities in the past few years.

Mr Liew said: 'Anything that creates yield, that is Reitable, we will Reit.' But he stressed that CapitaLand is not in a race to pump out Reits and will continue to be choosy about assets, making sure they are sustainable in terms of distribution payout and growth. While the group is inclined to continue to list Reits in Singapore, given the favourable regulatory framework and strong market reception, Mr Liew indicated that CapitaLand is open to helping partners in other countries who are keen on forming a Reit for listing in their home markets. CapitaLand could provide management and structuring services, he indicated. CapitaLand Retail CEO Pua Seck Guan said the group has built up a track record of drawing international investors to its Reits. 'Our name has become a chop of quality,' he said.

He also reiterated the plan for a secondary listing of CRCT in China, which he hopes will take place sooner rather than later. The trust manager said last week it plans to grow its $690 million initial portfolio of seven malls in China to $3 billion by 2009.

CRCT's IPO attracted strong demand - and the counter sparkled on its trading debut yesterday. It opened at $1.60 - a handsome 41.6 per cent premium to the offer price of $1.13 - and rose to $1.85 before closing at $1.80, reflecting an initial forecast distribution yield of 3.4 per cent. CapitaLand's maiden Reit, CapitaMall Trust (CMT), yesterday ended 12 cents lower at $2.70, reflecting a 4.2 per cent annualised distribution yield based on its Q3 results.

The seven malls owned by CRCT have land tenure ranging mostly from about 36 to 47 years - about half the typical land leases of CMT's malls in Singapore. Shorter leases are the norm in the China market, where typical land tenure is 40 years. But some market watchers say that going by experience in more sophisticated Reit markets, investors demand a higher distribution yield for a Reit holding assets with shorter tenure, to factor in the faster depreciation.

Still, caution seems to have been thrown to the wind in the case of CRCT, reflecting the strong liquidity and exuberance among investors captivated by the China growth story, some market watchers said.



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Extracts fm DBSVickers report dated 8- Dec-06,

REITs remain attractive with widening yield spreads. Moving forward, we expect REITs to continue to secure higher rents for new leases and renewals, backed by strong fundamentals in the property market. Hence, in anticipation of further organic growth through positive rental reversions and yield acquisitions, we expect S-REIT yields to continue to rise. Additionally, with SGS long bond yields currently on a downtrend, S-REIT yield spreads are expected to continue to widen.

Room for re-rating. Based on our estimates, the market is currently pricing in 119 bps yield spread for S-REITs. Although we have seen further yield compression recently, S-REITs remain attractive compared to Australia, whose average spread is about 110 bps. Therefore there is room for upward re-rating for S-REITs as forward yields of about 212 bps continue to compress to current yield spread levels.

Laggards with attractive yield: MMP and Allco. We have identified MMP and Allco, which have not experienced the same level of yield compression evident with other S-REITs in the market. Their yields are still attractive, trading at forward yields of 5.7% and 6.6% for MMP and Allco respectively. We have Buy recommendations for MMP and Allco, with target price of S$1.17 and S$1.17 respectively based on DCF valuation.

Other REITs. With uplift in distributable income expected from upside in office rentals and AEI initiatives, we maintain our Buy recommendation and target price of S$1.91 backed by DCF valuation for Suntec. For CDL REIT, we are upgrading our target price from S$1.33 to S$1.60, adjusting our terminal discount assumptions from 6% to 5% backed by positive fundamentals for hotel assets currently. With the lack of positive carry on yield, we are downgrading our recommendation for both CCT and K-REIT from Buy to Hold, target prices maintained at S$2.44 and S$2.45 respectively.



-- Edited by KK at 23:02, 2006-12-08

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BT, Published December 1, 2006

MAS to monitor cyclical impact of Reits on property sector

Concerns over their role in amplifying property rental, price movements

(SINGAPORE) The impact of real estate investment trusts on Singapore's financial stability will have to be studied as they continue to develop here, the Monetary Authority of Singapore said yesterday.

While Reits are generally positive for the financial system, 'there are concerns that Reits may amplify the cyclicality of property and rental prices', MAS said in a special feature in its latest Financial Stability Review.

To boost their asset base, Reit managers may continue to buy properties and as a result, bid up prices, MAS said. And their need to maintain attractive distributions to investors may also put upward pressure on rents. Indeed, since Q1 2004, rents for industrial, retail and office space have risen for nine consecutive quarters.

'However, preliminary assessment suggests that this trend is more a consequence of the generally favourable economic climate and increased occupancy rates across all segments of the property market,' MAS said.

As more Reits enter the market and competition intensifies, more Reit managers may also be driven to invest in offshore properties in a search for yield. 'This potentially increases the risks for Reits as they would be subject to the macroeconomic fluctuations of the offshore economies,' said MAS. 'Thus over time, as Reits expand, the financial stability dynamics between the Reits, the property sector and the financial system will evolve and need to be monitored.'

While Reits have a long history in the US and Australia, the first Singapore Reit was listed only in July 2002. The sector has since grown rapidly and there are now 13 Reits listed on the Singapore Exchange with a combined market capitalisation of more than $15 billion. They hold properties worth $21 billion, of which less than 20 per cent is in regional countries. The penetration of Reits is estimated at 8 per cent of investable real estate in Singapore.

MAS said Reits are generally considered a boon to the property sector. By turning chunky properties into simpler, divisible units for investors, they inject greater liquidity into the sector. They also reduce the property sector's dependence on bank loans by broadening financing options. And companies can release capital invested in illiquid and non-core assets through sale or sale-and-leaseback deals with Reits.

While some are concerned about the cyclical impact of Reits, others believe that 'Reits can moderate boom/bust cycles in the property sector because they introduce greater market discipline', MAS said. This is because Reits generally have a higher free float than listed property companies, which suggests they are more likely to be subjected to market discipline.

Reits are also required to obtain two independent valuations when transacting with interested parties, and must distribute at least 90 per cent of their taxable income to unit holders. This makes them more conservative in their acquisitions compared with property companies.

'However, there is currently no conclusive evidence that Reits have indeed moderated boom/bust cycles in the property sector across a range of country experiences,' MAS noted.



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BT, Published November 16, 2006

Aussie bank to list $394m fund on SGX

Babco ck & Brown to offer 323.5m shares; offer price not yet fixed

BABCO CK & Brown Group, Australia's second-largest investment bank, plans to list a $394 million investment fund in Singapore. According to its preliminary prospectus lodged with the Monetary Authority of Singapore, the fund will invest in three sectors - operating lease assets in the transportation industry, loan portfolio and securitisation assets, and 'alternative' assets such as music copyrights and the biofuels industry.

The assets will be originated or sourced by the group's operating lease and structured finance business units. If the initial public offer is successful, it will be the first such fund to list here.


The offer consists of 323.5 million shares in the Babco ck & Brown Structured Finance Fund, with an over-allotment option of up to 35.9 million additional shares. The offer price has not yet been fixed.

The group said the fund, which was established in April, is expected to start trading on the Singapore Exchange in late December. The joint lead underwriters, UBS and DBS Bank, will begin the book-building for the offer later this month. The group will retain a stake of at least 10 per cent in the fund after listing, it said. The fund will be managed by a wholly owned subsidiary of the group.

The fund's initial portfolio will consist of $394.3 million worth of assets split almost equally among its three target sectors. The assets are based in the US, Australia and Europe and are mainly originated by the group's own business units. Existing debt investors in a special vehicle currently holding the assets may convert some US$116 million of their debt to shares in the fund when it lists, the group said.

The assets include direct and indirect investments in commercial aircraft lease operators, a stake in a railcar lease operator managed by the group, and various debt instruments backed by residential and commercial mortgages in Australia and the UK. Other assets include loans to finance two US ethanol production plant projects owned by the group, a luxury condominium development in the US, and a biodiesel plant project in Australia. The single largest asset in the initial portfolio is a guarantee worth $60 million to support a third-party loan facility for a wholly owned subsidiary of the group related to the group's prime broking business. In addition, the fund has committed to investing US$40 million in the group's North American rail unit. It has also entered a contract with another business unit of the group, giving it the option to buy all music copyright assets owned by the group.

According to the offer document, the fund's managers intend to pay a total dividend of 10.06 cents per share for the period from listing to end-December 2007. Singapore tax residents will receive the dividends tax-free, as the fund is registered in Bermuda.

The managers forecast total revenue of $46.9 million and profit after tax of $28.7 million for the period from the listing date to end-December next year. They project distributable cash for the period will amount to $36.5 million. The managers will be paid a base fee of between one and 1.5 per cent of the fund's net investment value and 20 per cent of excess returns on the fund's shares measured against a performance benchmark



-- Edited by KK at 23:54, 2006-11-16

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BT, November 16, 2006, 12.00 pm (Singapore time)

First India Reit, Embassy, plans Singapore IPO

HONG KONG - The first property trust of Indian assets is due to be launched early next year, when business park developer Embassy Group spins off buildings in a Singapore IPO, according to sources familiar with the deal. The initial public offering was scheduled for March and would be 'fairly big', one source told Reuters, but it was still pending approval from Singapore authorities.

Embassy had identified one building it wanted to include in the real estate investment trust (Reit), and was in the process of picking a couple more, another source said, adding that it was too early to say how much the IPO would raise.

With India's economy growing at around 9 per cent a year, property prices are soaring, especially in major cities where call centres, research and development facilities and IT plants are setting up. -- REUTERS



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BT, November 16, 2006, 1.38 pm (Singapore time)

Temasek plans US$150m infrastructure fund IPO: source

SINGAPORE - Temasek Holdings, the Singapore government-owned investment firm, plans to raise up to US$150 million from the sale of shares in an Asian infrastructure fund early next year, a source familiar with the deal said.

The fund would be backed by about US$500 million of water and gas assets, and would be a vehicle for investing in Asian infrastructure assets, the source said, adding that Temasek would retain a big stake in the fund after the initial public offering.

'The idea would be to buy infrastructure assets with very predictable cash flows, very stable investments,' the source said, adding that the fund would not invest in high-risk, greenfield projects.

Temasek, which has a portfolio valued at $129 billion (US$83 billion), has been on an acquisition spree in Asia in a bid to boost its investment returns, and has most recently come under fire for its disastrous US$3.8 billion purchase of Thai telecoms group Shin Corp.

Ho Ching, Temasek's chief executive officer, on Tuesday told an investor conference organised by Morgan Stanley that she saw interesting opportunities for investing in infrastructure projects in Indonesia, which badly needs to upgrade much of its basic transport and utilities. 'We continue to be interested in Indonesia, but it has to compete against other investment destinations such as Vietnam, India and China,' Ms Ho told the conference. -- REUTERS



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BT, November 8, 2006, 9.27 pm (Singapore time)

CapitaLand to raise $218m with China Reit IPO

SINGAPORE - CapitaLand, Southeast Asia's largest developer, is raising up to $218.4 million (US$140 million) with the listing of a property trust based on its China shopping malls, according to its listing prospectus lodged on Wednesday.

The developer, which earns up to 80 per cent of its pretax profit abroad, is offering 193.3 million units in the real estate investment trust or Reit at between $0.95 and $1.13 each.

CapitaLand, 46-per cent owned by Temasek Holdings, said the CapitaRetail China Trust would be based on an initial portfolio of seven retail malls located in various Chinese cities. The Singapore-listed Reit would eventually invest in retail properties in China, Hong Kong and Macau, it added.

The company said the 2007 distribution yield for CapitaRetail China Trust would range from 5.42-6.45 per cent.

JP Morgan, which is sole financial adviser on the deal, is also underwriting the issue with UBS and China International Capital Corp. CapitaLand already manages two of Singapore's largest Reits -- CapitaMall and office trust CapitaCommercial. -- REUTERS



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BT, Published October 27, 2006

Lippo to raise $110.92m in SGX Reit listing 

THE real-estate arm of Indonesian conglomerate Lippo Group is raising up to $110.92 million with the listing of a property trust called First Real Estate Investment Trust (First Reit) on the main board of the Singapore Exchange, according to a preliminary prospectus filed yesterday. PT Lippo Karawaci Tbk, the largest listed broad-based property company in Indonesia, is offering 140.40 million units at an indicative range of 68 cents to 79 cents per unit.

The initial asset portfolio of First Reit, which will be managed by Bowsprit Capital Corp, will comprise Siloam Hospitals Lippo Karawaci, Siloam Hospitals West Jakarta, Siloam Hospitals Surabaya, and Imperial Aryaduta Hotel & Country Club. All these properties are worth up to $257 million, making First Reit the first Singapore-listed Reit to have Indonesian-based assets. Each of the property will be leased to PT Lippo Karawaci Tbk.

Lippo, which is controlled by Indonesia's Riady family, said the trust was established with the aim of owning and investing in diversified healthcare and related assets in high-growth markets in Asia, including Indonesia, Singapore, China, Malaysia, Thailand and Hong Kong. 'First Reit seeks to invest in health care and healthcare-related assets that are positioned to capitalise on the growing demand for healthcare services in Asia,' the prospectus said.


In fact, the group has already started the process of identifying and evaluating assets for future acquisition by First Reit. The Reit manager has also entered into non-binding memoranda of understanding (MOU) with three companies managed by Singapore-listed Pacific Healthcare Holdings Ltd. This is related to the proposed acquisition and leaseback of two Singapore nursing homes, as well as a Singapore hospital. It has also entered a non-binding MOU with PT Nusautama Medicalindo in connection with the proposed purchase and leaseback of an Indonesian hospital. First Reit manager is presently negotiating the financing and the broad lease terms with regard to the potential acquisition and leaseback of these properties. The manager intends to use a combination of debt and equity to fund future acquisitions, property enhancements and capital expenditure.

The group is forecasting a distribution yield of between 9.57 and 8.24 per cent in 2007.

Merrill Lynch and Oversea-Chinese Banking Corp are joint lead managers for the listing of First Reit.



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