Thursday, November 13, 2008

Ascendas-Reit Allays Fears Over TT International

Source : The Business Times, November 13, 2008

Tenant has placed security deposit of 11.4 months rent, it says

ASCENDAS-REIT (A-Reit) has come out to reassure investors that its tenants are not in breach of rental obligations.

Reit manager Ascendas Funds Management said yesterday that tenant TT International placed a security deposit equivalent to 11.4 months' rent, or $6.86 million. 'If the tenant should default on its rental or lease obligations, this security deposit could be used to offset any potential negative impact on A-Reit's financial results in the near term,' it said.

The announcement was made after TT International said recently it was in default on certain fixed-rate notes and would seek a halt on repaying money owed to its principal bankers and all unsecured creditors.

TT International Tradepark (TTIT), a subsidiary of TT International, rents a six-storey warehouse and adjacent 10-storey office building from A-Reit, near Jurong East MRT.

With a net lettable area of 42,765 square metres, the property accounts for 2.3 per cent of A-Reit's total net lettable space.

TTIT has a 10-year lease from March 2004 and accounted for 1.8 per cent of A-Reit's total gross monthly revenue at Sept 30. TTIT's current rent is $1.30 per sq ft per month.

The real estate investment trust manager said: 'At this juncture, TTIT is not in arrears on its rental obligation.'

A-Reit has 88 properties in Singapore. Fifty-two of these are sale-and-leaseback properties, which A-Reit says have security deposits of 8-15 months. The weighted average time to expiry for the 52 properties is 7.8 years and none of them is up for renewal until the second half of FY2009/10.

An A-Reit spokeswoman said 80 per cent of A-Reit's total rental income is paid by Giro, so defaults if any can be managed quickly. She said this is not an issue at present.

A-Reit has more than 860 international and local companies as tenants. Major tenants include SingTel, C&P Logistics, Siemens, TT International, Honeywell, Zuellig Pharma, LFD (Singapore), OSIM International, Venture Corporation, Federal Express, Freight Links Express, Johnson & Johnson, RSH, Infineon Technologies, Procter & Gamble and Hyflux.

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