Source : Today, Thursday, March 13, 2008
Fitch Ratings expects property trusts to see more mergers and acquisitions (M&As) in the near-to-medium term, with those trading below their book values likely to become targets of acquisitions.
Under certain conditions, the ratings firm said: “Such M&As could affect the credit ratings of the affected” real estate investment trusts (Reits). “Fitch believes that consolidation of the Singapore Reit market is likely but tempers this view with the knowledge that funding for such acquisitions may become more expensive or difficult to get.”
It noted that despite a relatively-liquid banking sector here, the current woes in the global credit market could affect the institutional real estate market here as many of the participants are either headquartered or have significant business interests outside Singapore.
Reits with foreign sponsors appear vulnerable to mergers and acquisitions or asset divestment, as are those “with small market capitalisations, experiencing difficulty in raising funds for asset expansion or refinancing debt and those also trading at below book value,” Fitch said.
Industrial property player Ascendas yesterday said it will pay $158 million for a 6.28-per-cent stake in Ascendas Reit held by a unit of Australia-based Goodman Group. The acquisition will increase Ascendas’ total unitholding in the Reit from 19.96 per cent to 26.77 per cent.
Allco Commercial Reit said on Sunday that it may sell its Australian assets.
Macquarie MEAG Prime Reit, which has interests in Wisma Atria and Ngee Ann City, said its biggest shareholder, Macquarie Real Estate, received “unsolicited offers” for its 26-per-cent stake. It is conducting a strategic review.
Fitch said that the latter two Reits and several others have their shares trading below book values, spurring discussion about how best “to unlock the shareholder value”.
But those with well-established presence and highly-regarded sponsors, such as CapitaMall Trust, are more likely able to take advantage of current opportunities to acquire assets from other Reits as they are better able to raise funding.
Friday, March 14, 2008
Goodman Exit Seen As Chance For A-Reit Expansion
Source : The Business Times, March 13, 2008
IN A move that could pave the way for Ascendas Real Estate Investment Trust (A-Reit) to finally expand overseas, Australia’s Goodman Group has exited the trust.
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Goodman is selling its 40 per cent stake in the entity that manages A-Reit as well as a 6.28 per cent stake in the trust itself. The latter transaction is for $158.16 million or about $1.90 per A-Reit unit. The counter closed at $1.95 yesterday, down two cents.
The buyers in both transactions are fully owned units of Ascendas Pte Ltd, which will gain full control of the Reit manager, which will be renamed from Ascendas-MGM Funds Management to Ascendas Funds Management (S).
Ascendas’ stake in A-Reit will also go up to 26.77 per cent.
An announcement last night put an end to speculation late last year that Goodman would exit A-Reit. Market watchers expected Goodman to sell its stake in the A-Reit manager when the Australian group was tipped to land the job of managing a proposed Reit that will hold some properties being divested by JTC Corp.
The strategy would have been to remove the conflict of interest of Goodman having an interest in two Singapore industrial Reit managers potentially competing for the same assets and tenants.
However, JTC eventually gave its Reit management job to Mapletree Investments in February. Although Goodman did not clinch that deal, some market watchers nonetheless welcome Goodman’s exit from A-Reit’s manager, as it paves the way for A-Reit to invest in properties outside Singapore.
A-Reit has never expanded overseas because of an understanding among the shareholders of the Reit manager to avoid conflict of interest, analysts say.
Goodman Group CEO Greg Goodman possibly hinted almost as much when he told BT last night that ‘we have operations in the region, and so does Ascendas’ and parting ways will minimise mutual conflict of interest.
Another important reason Goodman is exiting its involvement with A-Reit’s manager is because ‘our approach is that we prefer to have full control of any Reit manager we’re involved with, and that’s not possible in this case’, Mr Goodman said.
However, the group is not bidding goodbye to the Singapore industrial property market.
‘Goodman will re-enter the Singapore market at some point. We know this market well and we like it,’ Mr Goodman said.
The group could invest in the Singapore industrial property scene again, possibly through its wholesale property funds, or development activity.
IN A move that could pave the way for Ascendas Real Estate Investment Trust (A-Reit) to finally expand overseas, Australia’s Goodman Group has exited the trust.
.jpg)
Goodman is selling its 40 per cent stake in the entity that manages A-Reit as well as a 6.28 per cent stake in the trust itself. The latter transaction is for $158.16 million or about $1.90 per A-Reit unit. The counter closed at $1.95 yesterday, down two cents.The buyers in both transactions are fully owned units of Ascendas Pte Ltd, which will gain full control of the Reit manager, which will be renamed from Ascendas-MGM Funds Management to Ascendas Funds Management (S).
Ascendas’ stake in A-Reit will also go up to 26.77 per cent.
An announcement last night put an end to speculation late last year that Goodman would exit A-Reit. Market watchers expected Goodman to sell its stake in the A-Reit manager when the Australian group was tipped to land the job of managing a proposed Reit that will hold some properties being divested by JTC Corp.
The strategy would have been to remove the conflict of interest of Goodman having an interest in two Singapore industrial Reit managers potentially competing for the same assets and tenants.
However, JTC eventually gave its Reit management job to Mapletree Investments in February. Although Goodman did not clinch that deal, some market watchers nonetheless welcome Goodman’s exit from A-Reit’s manager, as it paves the way for A-Reit to invest in properties outside Singapore.
A-Reit has never expanded overseas because of an understanding among the shareholders of the Reit manager to avoid conflict of interest, analysts say.
Goodman Group CEO Greg Goodman possibly hinted almost as much when he told BT last night that ‘we have operations in the region, and so does Ascendas’ and parting ways will minimise mutual conflict of interest.
Another important reason Goodman is exiting its involvement with A-Reit’s manager is because ‘our approach is that we prefer to have full control of any Reit manager we’re involved with, and that’s not possible in this case’, Mr Goodman said.
However, the group is not bidding goodbye to the Singapore industrial property market.
‘Goodman will re-enter the Singapore market at some point. We know this market well and we like it,’ Mr Goodman said.
The group could invest in the Singapore industrial property scene again, possibly through its wholesale property funds, or development activity.
London Is Europe's Priciest Business Venue
Source : The Business Times, March 13, 2008
London is still by far Europe's priciest business location, but the cost of buying an office - as opposed to leasing one - is now greater in Madrid, Paris, Dublin, Munich, Barcelona and Stockholm, according to a report issued yesterday.
According to real estate services firm Knight Frank, rental yields - a valuation measure which moves inversely to price and is key for property investors - have leapt by a full percentage point in London in the last six months as global credit conditions have tightened.
However, commercial property yields have been more static elsewhere in the region.
As a result, the prime office yield for Europe's premier financial hub was at 5 per cent, but as low as 4 per cent in other European cities.
And yet, London was still the most expensive European city to rent not just prime office space but also well-located distribution warehouse and retail space.
'The yield correction already seen in the UK has yet to be fully evidenced in the other major European centres,' said Joe Simpson, Knight Frank's head of international research.
The fact that it has happened without denting London's position at the top of the European rental league was a strong argument in favour of London as an investment destination, he said.
Prime office rents in London's West End stood at 1,607 euros (S$3,427) per square metre per year, while prime distribution warehouse rents around London's Heathrow Airport were 212 euros per sq m and retail space in the UK capital's shopping malls was available at 6,427 euros per sq m, Knight Frank said.
Europe's next highest office rents were 1,358 euros per sq m in Moscow's central business district, where a building boom has so far failed to improve availability due to strong demand and where prime yields of 8 per cent were still the norm.
Dublin was second in the case of industrial warehouse and retail space but still around 30 per cent cheaper than in London. -- Reuters
London is still by far Europe's priciest business location, but the cost of buying an office - as opposed to leasing one - is now greater in Madrid, Paris, Dublin, Munich, Barcelona and Stockholm, according to a report issued yesterday.
According to real estate services firm Knight Frank, rental yields - a valuation measure which moves inversely to price and is key for property investors - have leapt by a full percentage point in London in the last six months as global credit conditions have tightened.
However, commercial property yields have been more static elsewhere in the region.
As a result, the prime office yield for Europe's premier financial hub was at 5 per cent, but as low as 4 per cent in other European cities.
And yet, London was still the most expensive European city to rent not just prime office space but also well-located distribution warehouse and retail space.
'The yield correction already seen in the UK has yet to be fully evidenced in the other major European centres,' said Joe Simpson, Knight Frank's head of international research.
The fact that it has happened without denting London's position at the top of the European rental league was a strong argument in favour of London as an investment destination, he said.
Prime office rents in London's West End stood at 1,607 euros (S$3,427) per square metre per year, while prime distribution warehouse rents around London's Heathrow Airport were 212 euros per sq m and retail space in the UK capital's shopping malls was available at 6,427 euros per sq m, Knight Frank said.
Europe's next highest office rents were 1,358 euros per sq m in Moscow's central business district, where a building boom has so far failed to improve availability due to strong demand and where prime yields of 8 per cent were still the norm.
Dublin was second in the case of industrial warehouse and retail space but still around 30 per cent cheaper than in London. -- Reuters
UK Commercial Property Prices May Not Increase This Year
Source : The Business Times, March 13, 2008
UK commercial property prices won't start rising until next year, according to Evans Randall Investment Management Ltd, the co-owner of the Gherkin office tower in London that's started a fund to buy assets in forced sales.
'We will probably look at 2008 as being relatively flat,' chief executive officer Michael Evans said in an interview on Tuesday at the MIPIM real estate conference in Cannes, France. 'A year from now, things will come back with a vengeance.'
Evans Randall, a closely held London-based investment bank, plans to complete a £250 million (S$700 million) acquisition within about a month, Mr Evans said. He wasn't more specific about the transaction.
UK commercial real estate prices fell 7.7 per cent last year, the biggest drop since 1990, according to Investment Property Databank Ltd, as banks curbed lending as a result of the US sub-prime mortgage crisis. Investors also became concerned a slowing British economy would curb demand for offices and crimp consumer spending.
Mr Evans, whose investors paid £452 million for Bank of America Corp's European head office in London's Canary Wharf district in July, said he was still able to finance deals about 80 per cent by debt compared with about 90 per cent before the credit crunch. His lenders include HBOS plc, HSH Nordbank, Bayerische Landesbank and Eurohypo.
Prices will start to recover next year because UK interest rates will be brought down as the economy slows, Mr Evans noted. 'I am still pretty bullish,' he added. 'There is still a big appetite to invest in London and it is coming to the point where it makes sense for investors to buy in London.'
Evans Randall has bought £300 million of assets in three transactions for its £1 billion fund.
That includes its first acquisition in London's West End, home to the world's most expensive offices, as well as Commerzbank AG's London head office. -- Bloomberg
UK commercial property prices won't start rising until next year, according to Evans Randall Investment Management Ltd, the co-owner of the Gherkin office tower in London that's started a fund to buy assets in forced sales.
'We will probably look at 2008 as being relatively flat,' chief executive officer Michael Evans said in an interview on Tuesday at the MIPIM real estate conference in Cannes, France. 'A year from now, things will come back with a vengeance.'
Evans Randall, a closely held London-based investment bank, plans to complete a £250 million (S$700 million) acquisition within about a month, Mr Evans said. He wasn't more specific about the transaction.
UK commercial real estate prices fell 7.7 per cent last year, the biggest drop since 1990, according to Investment Property Databank Ltd, as banks curbed lending as a result of the US sub-prime mortgage crisis. Investors also became concerned a slowing British economy would curb demand for offices and crimp consumer spending.
Mr Evans, whose investors paid £452 million for Bank of America Corp's European head office in London's Canary Wharf district in July, said he was still able to finance deals about 80 per cent by debt compared with about 90 per cent before the credit crunch. His lenders include HBOS plc, HSH Nordbank, Bayerische Landesbank and Eurohypo.
Prices will start to recover next year because UK interest rates will be brought down as the economy slows, Mr Evans noted. 'I am still pretty bullish,' he added. 'There is still a big appetite to invest in London and it is coming to the point where it makes sense for investors to buy in London.'
Evans Randall has bought £300 million of assets in three transactions for its £1 billion fund.
That includes its first acquisition in London's West End, home to the world's most expensive offices, as well as Commerzbank AG's London head office. -- Bloomberg
Office Demand Unaffected By Global Credit Crunch
Source : The Business Times, March 13, 2008
No threat of financial sector redundancies: URA
The credit crunch has so far failed to dent demand for office space in Singapore or derail its bid to become Asia's leading financial centre, a senior member of the city-state's Urban Redevelopment Authority (URA) told Reuters.
Speaking at the annual MIPIM trade fair in Cannes on Tuesday, Choy Chan Pong, head of land administration at the URA, said that Singapore had not felt the threat of vast financial sector redundancies and its construction boom continued.
'We have not seen any evidence of a decline in demand for office space, and for now most financial institutions in Asia are still hiring,' he said.
The URA said earlier this week that it planned to double the size of Singapore's Marina Bay financial district to 2.82 million square metres - or twice the size of London's Canary Wharf financial district - as international financial sector occupiers continued to seek presence in the city.
The authority had set aside 101 hectares of green parkland directly adjacent to the Marina Bay financial district that would serve as 'lungs' for the city, and which would never be sold for office schemes, at any price.
'We have had offers from several Middle Eastern developers and investors to buy the land we have allocated for the Marina Gardens but we will never sell it,' Mr Choy said. 'It stops Singapore from becoming a concrete jungle. It is priceless.'
Standard Chartered Bank and DBS Bank have agreed to take a total of 111,500 square metres of space at the Marina Bay Financial Centre, a 438,000 square metre office and residential project being developed by Keppel Land, Cheung Kong Holdings/ Hutchison Whampoa and Hongkong Land.
According to data from global property broker Cushman & Wakefield last month, Singapore prime office rents climbed 78 per cent in local currency terms in 2007 but Mr Choy quelled fears that this surge in rental costs had begun to price some occupiers out of the market, and towards rival markets of Tokyo and Hong Kong.
'You have to remember this rental increase was from a very low base. Singapore is still cheaper than Hong Kong . . . and Tokyo is almost full,' Mr Choy said.
Hong Kong is the second most expensive office market in the world, behind London, with annual office rents averaging US$239 per square foot. Tokyo is in third place with annual office rents at US$210 per square foot. Singapore is in seventh place.
Its annual office rents average US$130 per square foot.
'We do not expect financial institutions will have to choose one market over another, so we have no concerns about growth of China or Japan,' Mr Choy said.
'Realistically, banks know they have to be in all three cities because we serve different markets, and if banks want access to India or South East Asia, they need to be in Singapore.'
No threat of financial sector redundancies: URA
The credit crunch has so far failed to dent demand for office space in Singapore or derail its bid to become Asia's leading financial centre, a senior member of the city-state's Urban Redevelopment Authority (URA) told Reuters.
Speaking at the annual MIPIM trade fair in Cannes on Tuesday, Choy Chan Pong, head of land administration at the URA, said that Singapore had not felt the threat of vast financial sector redundancies and its construction boom continued.
'We have not seen any evidence of a decline in demand for office space, and for now most financial institutions in Asia are still hiring,' he said.
The URA said earlier this week that it planned to double the size of Singapore's Marina Bay financial district to 2.82 million square metres - or twice the size of London's Canary Wharf financial district - as international financial sector occupiers continued to seek presence in the city.
The authority had set aside 101 hectares of green parkland directly adjacent to the Marina Bay financial district that would serve as 'lungs' for the city, and which would never be sold for office schemes, at any price.
'We have had offers from several Middle Eastern developers and investors to buy the land we have allocated for the Marina Gardens but we will never sell it,' Mr Choy said. 'It stops Singapore from becoming a concrete jungle. It is priceless.'
Standard Chartered Bank and DBS Bank have agreed to take a total of 111,500 square metres of space at the Marina Bay Financial Centre, a 438,000 square metre office and residential project being developed by Keppel Land, Cheung Kong Holdings/ Hutchison Whampoa and Hongkong Land.
According to data from global property broker Cushman & Wakefield last month, Singapore prime office rents climbed 78 per cent in local currency terms in 2007 but Mr Choy quelled fears that this surge in rental costs had begun to price some occupiers out of the market, and towards rival markets of Tokyo and Hong Kong.
'You have to remember this rental increase was from a very low base. Singapore is still cheaper than Hong Kong . . . and Tokyo is almost full,' Mr Choy said.
Hong Kong is the second most expensive office market in the world, behind London, with annual office rents averaging US$239 per square foot. Tokyo is in third place with annual office rents at US$210 per square foot. Singapore is in seventh place.
Its annual office rents average US$130 per square foot.
'We do not expect financial institutions will have to choose one market over another, so we have no concerns about growth of China or Japan,' Mr Choy said.
'Realistically, banks know they have to be in all three cities because we serve different markets, and if banks want access to India or South East Asia, they need to be in Singapore.'
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