Complete Property Market Updates of Singapore

June 27, 2008

Pacific Star to buy MEAG stake in PRMH

Filed under: General,REIT — Propertymarketupdates @ 3:24 am

SINGAPORE-BASED Pacific Star has agreed to buy the 25 per cent stake held by MEAG Munich Ergo AssetManagement GmbH (MEAG) in Prime Reit Management Holdings Pte Ltd (PRMH).

PRMH owns 100 per cent of Macquarie Pacific Star Prime Reit Management Pte Ltd, the manager of Singapore Exchange-listed Macquarie MEAG Prime Reit (MMP Reit). It is also the sole owner of Macquarie Pacific Star Property Management Pte Ltd, the property manager of MMP Reit.

Pacific Star’s existing stake in PRMH is held through its associated company Investmore Enterprises Ltd. The purchase will increase Pacific Star’s interest in PRMH to 50 per cent, the same level as the interest of the Macquarie group.

Said Alfred Lim, chief corporate officer of Pacific Star: ‘Reit management is a core business of Pacific Star. The purchase reaffirms Pacific Star’s firm commitment to the growth of the Singapore Reit industry.’

Pacific Star manages a suite of funds, namely the 1.2 billion euros (S$2.45 billion) Asia Real Estate Income Fund (Areif), the US$600 million Baitak Asian Real Estate Fund (a joint venture between Pacific Star and Kuwait Finance House), the US$750 million Asian Real Estate Prime Development Fund which invests in prime development projects in key Asian cities and the US$500 million PS Arrow Vietnam Fund (a joint venture with Alony Hetz of Israel).

Pacific Star recently announced plans to launch the US$2 billion Pacific Star Fund Select Concept targeting Asian real estate under an umbrella fund structure. Earlier this year, Pacific Star acquired Singapore Power Building for Areif.

Source : Business Times – 30 May 2008


June 19, 2008

Moody’s sees cloudy skies ahead for Singapore Reits

Filed under: General,REIT — Propertymarketupdates @ 5:03 am

They are given a negative outlook because of debt servicing concerns

MORE gloomy news has come in for the property sector, this time for Singapore-listed real estate investment trusts (S-Reits).

They have been stamped with a negative outlook by credit ratings agency Moody’s Investors Service.

While the trusts’ fundamentals remain solid, with their properties enjoying high occupancies and strong demand, Moody’s sees cloudy skies ahead for them in the next 12 to 18 months.

This means it thinks there are negative influences that may lead to a ratings review within that time. These ratings gauge a company’s ability to repay its debts.

Moody’s cited adverse sentiment and tighter liquidity in the market as the reasons for its change in outlook, saying these factors make it tougher for Reits to get funds just when they are most needed.

Several Reits are reaching a stage where they need to refinance their debts, but they are finding it more difficult and expensive to borrow funds, Moody’s said.

Despite this, some trusts have been forced to rely on bank loans to pay for acquisitions they have already committed to, it added.

This is also partly because the unit prices of many trusts have tumbled in recent months, making equity funding – raising money by issuing more units – an unattractive alternative.

‘Because S-Reits retain little cash, the primary source of repayment tends to come from either new debt, asset sales or equity,’ said Moody’s in a report yesterday.

‘When these markets tighten, this financial positioning exposes those Reits that have a high level of short-term debt and lack long-term, committed funding.’

Since January, Moody’s has downgraded one Reit twice, put two others on review for a possible downgrade and issued negative outlooks for another three.

The latest negative outlook rating came in yesterday for CapitaMall Trust, after it said it would pay $840 million to buy The Atrium@Orchard office building.

Moody’s has also given negative outlooks for Suntec Reit and Mapletree Logistics Trust because of financing pressures and high gearing, respectively.

The ratings agency downgraded Allco Commercial Real Estate Investment Trust in January and again in March on refinancing concerns.

CapitaCommercial Trust, which bought the 1 George Street office building for $1.2 billion in March, and Macquarie Meag Prime Reit, which owns stakes in the Wisma Atria and Ngee Ann City malls, are still on review and may be downgraded.

Moody’s also said it was possible that smaller Reits would be merged with their bigger rivals in the coming months.

‘Difficult access to funding and a diminished opportunity to grow will increase the likelihood of smaller Reits being acquired as the year proceeds,’ it said.


‘Because S-Reits retain little cash, the primary source of repayment tends to come from either new debt, asset sales or equity. When these markets tighten, this exposes those Reits that have a high level of short-term debt and lack long-term funding.’

MOODY’S, on the risks some property trusts are facing

Source : Straits Times – 23 May 2008

MI-Reit sees organic growth driving returns

Filed under: Commercial,General,REIT — Propertymarketupdates @ 4:51 am

A SERIES of acquisitions boosted fourth-quarter results for MacarthurCook Industrial Reit (MI-Reit), but weak capital market conditions will limit fresh opportunities in the short term.

MI-Reit purchased nine properties in FY2008, five of them in Q4 alone.

‘Since MI-Reit’s listing in April 2007 we have successfully executed our strategy to grow MI-Reit through yield-accretive acquisitions,’ said acting CEO of MacarthurCook Investment Managers Craig Dunstan.

Rental contributions from the acquisitions translated to distributable income of $5.8 million for Q4 ended March 31, 2008 – 19.9 per cent higher than the forecast $4.8 million.

Going forward though, MI-Reit expects economic growth in Asia to moderate, and says organic growth may soon become the bigger driver of returns.

On the trust’s outlook for FY2009, Mr Dunstan said: ‘We will focus on optimising yield from MI-Reit’s existing portfolio through active asset management.’

He added that ‘we expect to resume our active acquisition growth strategy once capital market conditions improve’.

Weak markets have hampered MI-Reit’s plans to issue equity.

In January it postponed a $200 million equity fund-raising exercise and said yesterday it is unlikely to revisit this plan until early next year.

As part of the strategy to extract greater value from its existing portfolio, MI-Reit has identified properties with built-up plot ratios below the maximum allowable plot ratio of up to 2.5 per cent under the Urban Redevelopment Authority’s Master Plan.

The trust said at a media briefing yesterday: ‘Returns from such additional space additions are likely to provide higher than normal property yields, as they are not subject to land costs.’

The manager of MI-Reit has also been searching for a CEO since the previous CEO, Chris Calvert, left in March.

According to Mr Dunstan, it has been challenging finding a high-quality candidate who knows how to run a Reit and knows about real estate in Asia.

Nevertheless, the temporary absence of a CEO has not evolved into a worrying issue, as MI-Reit has no plans to undertake strategic initiatives in a weak market.

Source : Business Times – 23 May 2008

June 11, 2008

MI-Reit’s distributable income rises

Filed under: General,REIT,Rental News — Propertymarketupdates @ 5:32 am

Q4’s $5.8m boosted by rentals from new properties

STRONG rental contributions from its new properties lifted Macarthurcook Industrial Reit’s (MI-Reit) distributable income in the fourth quarter to $5.8 million, with distribution per unit (DPU) coming in at 2.22 cents.
Q4 distributable income was 19.9 per cent higher than its initial forecast, while DPU was 19.4 per cent ahead of estimates.

‘The 19.4 per cent higher than forecast DPU for 4Q FY08 was largely due to rental contributions from our acquisitions of nine yield accretive properties during the year. Of these nine properties, five were acquired during the fourth quarter,’ said Craig Dunstan, chief executive officer of the manager for MI-Reit.

These acquisitions increased the total value of MI-Reit’s investment properties by 75.5 per cent to $555.4 million, compared with its initial portfolio value of $316.5 million, he added.

MI-Reit’s net property income for the fourth quarter ended March 31 stood at $8.21 million, 38.1 per cent higher than forecast. Taking an earlier revaluation gain from its 12 properties into account, its net asset value per unit (NAV) was $1.29 at the end of March, 7.5 per cent higher than the NAV of $1.20 at its initial public offer in April 2007, it said in a statement yesterday.

Annualised DPU came in at 7.91 cents for the full financial year, beating forecasts by 6.7 per cent. The annualised yield worked out to be 8.03 per cent, based on the closing price of $0.985 per unit at the end of March. Full-year distributable income also beat estimates at $19.61 million.

Properties acquired in the last six months include new warehouse and logistics facilities in Yishun Industrial Park A and Defu Lane 10, as well as a manufacturing complex in Kallang Way which was acquired through a sale and leaseback agreement with Xpress Holdings.

Besides lifting rentals, these acquisitions also helped to reduce the reliance on a single property or tenant, said MI-Reit. As testament to the results, it said no single tenant contributed more than 20.3 per cent to total rental income in March this year.

Looking ahead, Mr Dunstan expects economic growth in the region to be moderated as a result of the US mortgage crisis and this may put a temporary halt to MI-Reit’s acquisition plans. However, he expects demand for industrial properties to remain strong across Asia.

MI-Reit shares closed at 96 cents yesterday, down 1.5 cents.

Source : Business Times – 22 May 2008

Switch to S-Reits for their defensive nature: analysts

Filed under: Developer News,General,REIT — Propertymarketupdates @ 4:40 am

AGAINST the backdrop of uncertainty facing property developers, analysts advocate taking defensive positions in real estate investment trusts (Reits).

While there have been concerns about Reits as the credit crunch dried up their acquisition activity in the past six months, these worries now pale in the face of weightier concerns about slower home sales and falling home prices surrounding developers.

‘We believe the Singapore residential property sector could see a bursting of a bubble that has been created from exuberant expectations and liquidity over the past two years,’ Credit Suisse analysts said in a report this month. ‘We advocate switching from riskier residential exposure to S-Reits.’

Echoing these views are CIMB-GK analysts Donald Chua and Janice Ding. In a report yesterday, they said: ‘We remain confident in S-Reits for their defensive nature and attractive yields of 6.2 per cent on average and general positive outlook for property rents in the medium term.’

In particular, CIMB-GK prefers Reits with larger asset portfolios that can provide sustainable and stable income streams, experienced management teams with established track records and strong sponsors with quality assets to inject into the Reits.

‘We are also more inclined towards Reits with material Singapore-based assets in view of the strengthening Sing dollar,’ the CIMB-GK analysts said.

This makes industrial and retail Reits the brokerage’s top picks, given their defensive and stable income, and hospitality Reits in view of rising demand and rents.

Even though industrial rents rose some 32 per cent last year, they are still about 30 per cent below their peak in 1996. Hence, the analysts reckon there is still room for stronger catch-up in industrial rents as Singapore’s manufacturing moves towards knowledge-based industries such as research and development and the biomedical sector.

In addition, the longer weighted average leases for industrial space and the lower likelihood of industrial tenants terminating their leases before expiry give industrial Reits further defensiveness in their income stream.

Elsewhere, retail rents have shown the greatest resilience during economic downturns, and tenants also showed the least propensity for cutbacks in demand for space in poor economic conditions, the CIMB-GK analysts said. Efforts by the government to boost Singapore as a financial and tourism hub also bode well for the retail sector.

They noted that between the last rental peak in 1996-1997 and the rental trough in 2003-2004, retail rents fell the least – by 34 per cent, compared with 45 per cent for industrial rents and 54 per cent for office rents.

‘Furthermore, the retail segment also has the greatest potential to grow organically via enhancements to facades, layouts and tenant mixes,’ they added. ‘This trait further enhances the defensive nature of retail Reits, particularly when prices may not be conducive and funding for acquisitions may not be readily available.’

Credit Suisse analysts also favour retail Reits for their more defensive nature, particularly CapitaMall Trust and Frasers Centrepoint Trust.

For investors with a higher risk appetite, CIMB-GK analysts recommend hospitality Reits, which hold growth potential from expected increases in business and leisure travel but are seen to be most vulnerable to external risks.

In contrast, the outlook for property developers is more clouded. CIMB-GK said its models have factored in 10-20 per cent declines in property prices in the mid-luxury segment, but it has upgraded its rating on the sector to ‘neutral’ from ‘underweight’ due to current low valuations.

Source : Business Times – 21 May 2008

Reit market may see mergers, privatisations

Filed under: General,REIT — Propertymarketupdates @ 2:12 am

AS THE market for listed property trusts in Singapore matures, it is likely that some will merge or go private.

There has been ‘a lot of speculation’ that such movements will take place soon, said experts on real estate investment trusts (Reits) at a regional property conference this week.

There are ‘three to five Reits in Singapore that seem obvious’ for acquisitions or privatisations, said Mr Mark Pawley, the chief executive officer of Oxley Capital.

‘It’s somewhat surprising that we haven’t seen more obvious transactions’ in that direction, he added.

Oxley is a Singapore-based private investment house that focuses on real estate and private equity. It has a stake in the manager of the Cambridge Industrial Trust, an industrial property Reit.

Mr Pawley suggested that one reason the Singapore Reit market has yet to consolidate is that private equity funds, which could help engineer some of these deals, might be ‘all cashed out’.

He was speaking to property players as part of a panel on Reits at the annual Financial Times Asia Property Summit, held at the St Regis Singapore on Thursday.

The topic was ‘Reits: Still a good bet?’ and the answer was, for the most part, yes.

Asian Reit markets reached a peak last October, before they started to feel the effects of the fallout from the United States sub-prime mortgage crisis, said Mr Daniel Ekins, the head of Asia-Pacific real estate securities at Deutsche Bank’s property arm, RREEF.

That was followed by a general sell-off of property trusts until mid-March, which pushed values down by 25 to 35 per cent in each country, he added. Since then, the values of Reits have rebounded by about 10 per cent.

While retail investors are still reluctant to re-enter the market, institutional investors have already started buying Reits, Mr Ekins noted.

‘The turnaround has already started. We’ve seen people coming to our funds who were reluctant to do so in the fourth quarter of last year,’ he said.

‘But retail investors will want to see prices rise 20 per cent before coming in,’ he added.


Mr Mark Pawley, the CEO of Oxley Capital, said it was ’somewhat surprising’ that there have not been more acquisitions or privatisations of Reits in Singapore.

He suggested that one reason the Reit market here has yet to consolidate is that private equity funds, which could help engineer some of these deals, might be ‘all cashed out’.

Source : Straits Times – 17 May 2008

June 4, 2008

A-Reit buyer of Creative’s HQ building in Jurong East

Filed under: Commercial,General,Property Deal,REIT — Propertymarketupdates @ 4:17 am

ASCENDAS Real Estate Investment Trust (A-Reit) has emerged as the buyer of Creative Technology’s headquarters building at 31 International Business Park in Jurong East. The price will be $246.8 million.

Creative said in March that it had agreed to sell and lease back the property but did not disclose the buyer’s identity. The deal is subject to approval by Creative shareholders and JTC Corp.

On completion of the sale, a Creative subsidiary will lease the property for five years, with options to renew for a further three plus two years.

A-Reit’s manager said the average yield for the initial five-year lease will be 6.24 per cent. Additional rent is payable in the third and fifth years of the lease if the cumulative increase in Singapore’s Consumer Price Index exceeds 5 per cent.

Had A-Reit bought, held and operated the property since the start of the current financial year, the proposed acquisition would have boosted its distributable income per unit by 0.07 cent.

A-Reit’s manager will receive a $2.5 million acquisition fee. Other transaction costs are estimated at $3.7 million.

The property, valued by CB Richard Ellis at $246.8 million, is a part five-storey, part seven-storey and part eight-storey tower with basement parking.

It has an auditorium and a 2,000-capacity outdoor amphitheatre and is on a 265,739-sq-ft site with 30 + 30 year leasehold tenure from Dec 16, 1994.

A-Reit plans to fund the acquisition by debt and/or equity. On the stock market yesterday, the counter ended 14 cents lower at $2.50.

Source : Business Times – 10 May 2008

May 12, 2008

K-Reit: Time needed to process rights

Filed under: General,REIT — Propertymarketupdates @ 2:34 am

WE refer to Denis Distant’s letter, ‘K-Reit Asia rights issue – why so slow?’ (BT, May 6, 2008).

K-Reit Asia’s closing date for application of rights units was April 25, 2008. The period between this date and May 8, the listing date of the rights units, was necessary to allow for smooth processing of the rights issue.

This involves adherence to a set of procedures including the validation of the acceptance of rights entitlements and application for excess rights units, transfer of subscription monies as well as allotment, crediting and issue of the rights units.

The manager of K-Reit Asia has nevertheless worked closely with the relevant parties to expedite the process, and the results of the rights issue were announced on May 5, 2008.

We understand that Olam International did a preferential offering while K-Reit Asia’s exercise was a renounceable rights issue for which more time must be allowed so that unitholders have the opportunity to trade their ‘nil-paid’ rights entitlements on SGX-ST.

We wish to thank Mr Distant for his feedback.

Choo Chin Teck
Joint company secretary, K-Reit Asia Management Limited

Source : Business Times – 7 May 2008

KReit Asia rights issue – why so slow?

Filed under: Financing,General,REIT — Propertymarketupdates @ 1:30 am

THE final payment date for the ongoing KReit Asia rights issue was April 25, but applicants will have to wait until May 8 to know the outcome of their applications for excess units.

Why does it take almost two weeks to announce the results of the rights issue? Surely the outcome could be published within a few days. KReit Asia would do well to ask the managers of its rights issue to refer to their counterparts who handled the recent rights issue of Olam International, which completed the entire exercise in a much shorter time.

Denis Distant, Singapore

Source : Business Times – 6 May 2008

New Master Plan expected to see selective changes

Filed under: Commercial,General,HBD Reviews,Hospital,Hotel,Land Sale,REIT — Propertymarketupdates @ 1:27 am

Key sectors seen benefiting include hotels, aerospace, healthcare, transport

URBAN Redevelopment Authority’s Master Plan 2008 – which will be exhibited soon – will see changes in land use and increases in plot ratios, but these will be selective and focused on growth areas, rather than a widespread upgrade in densities, DBS Vickers Securities said in a report dated yesterday.

The strategic initiatives from the Master Plan will filter down to improved growth fundamentals for various economic sectors. While the property sector will be a key and obvious beneficiary, also standing to benefit from the strategic outline are the hotels, aerospace, healthcare, transport and construction sectors, the report said.

More land will be provided for development of the aerospace industry and the establishment of a designated hub near Seletar Airport will continue to provide strong fundamentals for the sector’s continued growth. For the healthcare sector, DBS Vickers sees a medical hub developing around the Novena area and ‘we could see rezoning of land parcels in this area to facilitate the development of this medical hub’.

It also suggests plot ratio increases in some mature HDB estates, as part of the rejuvenation plan. With Jurong and Paya Lebar earmarked as new business hubs outside the CBD, ‘we are likely to see a concentration of Government Land Sale projects in these two areas in the medium term’.

Noting that the authorities have revealed plans for new residential enclaves such as the area around Marina South Gardens and Kallang Basin, it said, ‘we expect rezoning and plot ratio adjustments in these areas’.

‘We expect much of the key significant land use and plot ratio changes to be concentrated in certain strategic areas – Seletar (aerospace industrial use), Jurong (new regional centre), Paya Lebar (commercial hub near city fringe), Marina Bay (white sites and residential), Novena (medical and healthcare), Kallang Basin (residential) and Ophir-Rochor (mixed development).’

The report added: ‘With the phased opening of the Circle Line from 2009 onwards, we also expect to see an increase in plot ratios for undeveloped state land sites that are close to Circle Line MRT stations, and in particular those that intersect with existing MRT stations.’

‘With interchange stations planned at Paya Lebar, Serangoon, Bishan, Buona Vista, Harbourfront and Dhoby Ghaut, we believe that the highest potential for plot ratio changes could come at the Paya Lebar and Serangoon stations, given that the area around the remaining interchange stations are already relatively built up,’ DBS Vickers said.

Source : Business Times – 6 May 2008

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