Weaker Demand Hits Ascott Reit

Source : The Business Times, April 23, 2009

ASCOTT Residence Trust (Ascott Reit) posted a 23 per cent year-on-year drop in distributable income for the first quarter ended March 31, 2009 - from $14.2 million to $10.8 million.













In terms of distribution per unit (DPU), the fall is 24 per cent - from 2.33 cents in the corresponding quarter the year before to 1.77 cents. No distribution was declared for Q1 as Ascott Reit makes distributions to unitholders on a half-yearly basis.

Gross profit for the quarter fell 16 per cent to $19.9 million, while revenue registered an 8 per cent decrease to $42.1 million. The trust attributed the lower revenue to the weaker demand for serviced residences in China and Singapore, along with increased competition in Beijing and Shanghai.

The group's serviced residences in Singapore took a 27 per cent hit in revenue from $9.2 million to $6.7 million year-on-year with revenue per available unit (RevPAU) falling 33 per cent from $251 to $169 year-on-year.

'This decrease was due to lower occupancy as a result of reduction in demand from business travellers,' the group said yesterday. 'However, the performance of Indonesia, Vietnam and the rental housing business in Japan continues to be relatively stable,' said Chong Kee Hiong, chief executive officer of Ascott Residence Trust Management.

The group expects a maximum of $96 million to be due for refinancing in December. According to Mr Chong, Ascott Reit has already initiated discussions with banks to secure refinancing ahead of maturity.

While the group expects to remain profitable for 2009, it said that operating profit will be lower compared to the year before.

The counter closed half a cent lower yesterday, at 46.5 cents.

Reit Model Under Pressure

Source : The Business Times, January 5, 2009

SINGAPORE-listed real estate investment trusts (Reits) are now victims of their own success.

Sliding: CB Richard Ellis reckons that prime Orchard Road rents could contract 5-10 per cent in just the first half of 2009

Over the past three years, most Reits here have taken an aggressive growth path, snapping up expensive properties and pushing up rentals in their properties as they took advantage of the property boom. This has allowed them to increase net property incomes and deliver good dividends to their unitholders.

But now, the good times have come to an end, and it is unclear how these Reits will deliver the kind of returns shareholders have gotten used to.

When reporting their Q3 results, the Reits admitted that growth through acquisitions will slow, what with the current credit squeeze making merger and acquisitions (M&As) more difficult and expensive across all sectors. The Reits said they will look to organic growth, such as enhancing their existing lettable space in search of higher rents.

But how much organic growth there can be under these conditions is debatable.

Retail Reits, for example, increase their property incomes in three ways - from acquisitions, through rental increases after they enhance their properties, and increased sales from their tenants, which they typically take a cut of.

But now, all three avenues for property income growth appear to be blocked. Acquisition growth, as mentioned, is no longer as viable. Retail sales are expected to take a beating this year as consumers cut back on spending as concerns over job and wage security take hold. Because of this, landlords, who typically take a percentage of turnover as part of the rent, will also see takings fall.

And rents will fall, as tenants try to bring landlords back to the negotiating table to ask for more manageable rates. 'A prolonged depression in consumer spending could affect retailers' ability to service their rents and we think it is possible that more retailers would renegotiate for lower rental rates, and retail mall managers may have to give in to avoid a high turnover in tenants,' noted OCBC Investment Research in a recent report. As one market observer put it, 'Reits can't really squeeze the tenants anymore or they will just simply close shop.'

In 2009, CB Richard Ellis reckons that prime Orchard Road rents could contract 5-10 per cent in just the first half of the year. At prime suburban malls, a 2-3 per cent decline is likely, the property consultancy said. Prime Orchard Road rents fell 1.9 per cent quarter-on-quarter in Q4 2008, while prime suburban rents shed one per cent, the firm's data showed.

The same trend holds true for the office and industrial sectors. CBRE's data showed that average Grade A and prime office rental values in Singapore are estimated to have slipped about 20 per cent in Q4 2008. More falls are expected this year. Likewise, rents for industrial space could see double-digit percentage falls, analysts have said.

With retail, office, and - to a lesser extent - industrial Reits, having raised rentals quickly over the last few years, tenants are finding themselves in a tough spot during these trying times. Office rents, for example, nearly doubled in 2007, rising 96 per cent in the Grade A category and 92 per cent for prime space. That was on top of gains of 53 and 50 per cent respectively posted in 2006.

What this means is that tenants, who have been paying jacked-up rentals over the past two years, will in some cases lack the reserves to withstand the current crisis. They are also more likely to push for substantial rental decreases, which could affect the Reit model.

Jannie Tay, president of the Singapore Retailers Association, called for a drop in retail rents - in light of weaker sales - as early as September last year. Recently, she again asked retail landlords to cut rents by between 30 and 50 per cent. Reits are going to face pressure to give in.

CCT, Suntec, Parkway Reits Pick Of Analysts

Source : The Business Times, December 8, 2008

Reasons include strong parentage, minimal near-term refinancing risks

TWO research firms - Nomura and CIMB - have issued 'buy' calls on CapitaCommercial Trust (CCT) in recent reports.

Suntec Reit and Parkway Life Reit were also picked as good buys in the local real estate investment trust (reit) market.

In a report last Wednesday, Nomura Research said that office sector reits are its top picks. 'Our valuation diagnosis suggests the market's somewhat morbid assessment is more than pricing in such concerns in the office sector and we retain our 'buy' calls on CapitaCommercial Trust and Suntec Reit,' it said.

Weaker demand is likely to see office rents fall by almost half to a trough in 2011, Nomura predicted. But CCT has already renewed leases due even in FY 2009-2010. This, plus rental support from One George Street until FY 2013 and minimum rent at Raffles City until FY 2011, should provide stability to about half of the rental income stream despite the office downcycle.

Given CCT's strong corporate profile and parentage, Nomura is also confident that debt will be refinanced, though the cost is likely to be significantly higher. Nomura has a target price of $1.14 on CCT, which closed at 62.5 cents last Friday.

For Suntec Reit, Nomura expects office reversions to remain positive in FY 2009-2010 despite the overall weaker market and for Suntec City Mall to hold its own against growing competition.

'With the $700 million CMBS (collateralised mortgage-backed securities) loan not due until next December, near-term refinancing risks are minimal,' Nomura's note concluded. The firm has a target price of 90 cents on Suntec Reit, which ended last Friday at 63.5 cents.

CIMB's top reit picks are CCT and Parkway Life Reit, it said in a report last Friday. 'From the refinancing deals announced in October and November, we conclude that reits with strong sponsors, particularly Government-linked sponsors, low leverage and quality portfolios, are more likely to secure bank loans, which are the preferred refinancing option,' said CIMB analyst Janice Ding.

CCT is sponsored by CapitaLand, which is a Temasek-linked company. CIMB has a target price of $1.17 on CCT.

Parkway Life Reit, on the other hand, was chosen for its stable income stream from Parkway Holdings, the reit's major tenant and operator, which remained profitable throughout the last two recessions in 1998 and 2002. CIMB has a target price of $1.30 on the reit, which closed at 71.5 cents last Friday.

Moody's Cuts MI-Reit's Ratings; Review For Possible Downgrade

Source : The Business Times, November 26, 2008

Moody's Investors Service has on Wednesday downgraded Macarthurcook Industrial REIT's ('MI-REIT') corporate family rating ('CFR') to Ba2. The rating remains on review for possible downgrade.

'The downgrade reflects Moody's views that MI-REIT is not likely to meet the scale and diversity targets that were built into its original rating when it was first assigned ', says Kathleen Lee, Moody's lead analyst for the trust.

'As a result MI-REIT shows high levels of asset and tenant concentration, more consistent with a Ba2 rating,' adds Lee.

'In addition, the trust has an outstanding sale & lease-back arrangement with a call and put option in respect of 4A International Business Park (entered into since August 2007) which if completed by end-December 2009, on fully-debt financed terms, would result in a material weakening of its credit metrics', continues Lee.

'There also remains considerable uncertainty as to how this acquisition will be funded if the put option is exercised by the vendor,' she added.

'The rating remains on review for downgrade primarily reflecting ongoing concerns surrounding MI-REIT's significant refinancing risk with 91% of its total debts, or S$201 million, falling due in April 2009, amid very challenging credit markets conditions', says Ms Lee.

'The absence of available committed facilities and the REIT's lack of extensive relationships with banks have significantly constrained MI-REIT's liquidity profile and increase the risk of further downgrades' adds Ms Lee.

Moody's acknowledges that MI-REIT's rating continues to be supported by its steady revenue streams supported by a relatively long lease maturity profile and adequate lease deposits that partially mitigates the trust's low asset diversification and moderate tenant concentration.

The review will continue to focus on:

1) MI-REIT's progress in securing committed financing to meet its debt maturities in April 2009 as well as the final contracted terms & conditions once refinancing is raised, and

2) the funding plan for the committed acquisition. The ratings could decline rapidly if material progress on securing committed financing for its April 2009 debt maturities is not made over the course of the next 2 months.

Headquartered in Singapore, MI-REIT is a real estate unit trust that was formed primarily to own and invest in a diversified portfolio of industrial properties. The company reported total assets of approximately S$568 million and gross revenue of $12.4 million for the first quarter ended 30 September 2008.

Marginal Fall In Value Of 5 MI-Reit Properties Here

Source : The Business Times, November 20, 2008

Its only warehouse property in Japan revalued upwards by 13.4%

MACARTHURCOOK Industrial Reit (MI-Reit) has seen the valuations of five Singapore properties fall 1.3 per cent to $141.6 million from $143.4 million a year ago.

The properties are at Joo Seng Rd, Gul Way, Changi South Lane, Changi South Avenue and Tuas Avenue 20.

In a statement yesterday, MI-Reit said it recently obtained new independent valuations for eight properties - seven in Singapore and one in Japan.

The other two Singapore properties - at Tuas Avenue 2 and Admiralty Rd - in this revaluation exercise were unchanged in value at $23 million and $14.8 million respectively.

The Japanese property - Asahi Ohmiya Warehouse in Japan - was revalued 13.4 per cent higher at $33.1 million, up from $29.2 million a year ago.

MI-Reit has 21 properties - 20 in Singapore and one in Japan.

It said the valuation exercise increased its portfolio value to $559.9 million as at Nov 15. A year ago, when it had 13 income-producing properties, the portfolio was valued at $370.8 million.

In September, MI-Reit said it had obtained valuations for seven other Singapore properties. None of these had fallen in value, though four were unchanged. Collectively, the seven properties had a total value of $227.6 million at Sept 1, up from $226.3 million a year earlier. This was a 0.6 per cent increase.

According to a report by Colliers International, average capital values of prime freehold factory space and warehouse space in Q3 2008 remained largely unchanged.

Colliers estimated prime freehold factory space to have remained at $548 per sq ft (psf) and $437 psf for ground and upper-floor space respectively. Prime freehold ground and upper-floor warehouse space was estimated at $521 psf and $392 psf respectively.

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.

CMT Puts Works At Three Malls On Hold

Source : The Business Times, October 22, 2008

Trust's fundamentals strong, rents not likely to bottom out

CAPITAMALL Trust (CMT) yesterday said that it will put upgrading plans for some of its properties on hold because of high construction costs.

The Atrium: CMT's third-quarter distributable income rose 14.2 per cent to $60.8 million, from $53.2 million a year earlier, as contributions kicked in from this new acquisition

Singapore's biggest property trust also said that its third-quarter distributable income rose 14.2 per cent to $60.8 million, from $53.2 million a year earlier, as contributions kicked in from new acquisition The Atrium. Q3 distribution per unit (DPU) rose to 3.64 cents a share, from 3.4 cents a year earlier. Net property income rose 13.1 per cent to $86.9 million, from $76.8 million in Q3 2007.

The earnings were in line with expectations, analysts said. The news pushed CMT shares to their highest level in more than two weeks. The stock rose as much as 16 cents or 7.8 per cent to $2.21 before ending the day at $2.11.

Looking ahead, CMT will be cautious, will review new commitments carefully and will not sacrifice liquidity for new projects, said Lim Beng Chee, chief executive-designate of the trust's manager. For now, enhancement programmes that have not started at three malls - Funan DigitaLife Mall, Tampines Mall and Jurong Entertainment Centre (JEC) - have been put off. Works at JEC were projected to cost about $170 million.

The trust's fundamentals are strong as rents are not expected to bottom out in the next few quarters, said Pua Seck Guan, CMT's outgoing chief executive. So far this year, CMT has renewed 289 leases - which make up 15.4 per cent of total net lettable area - at a 9.3 per cent increase to preceding rental rates. There is also a $12.2 million projected increase in net property income from ongoing asset enhancement works.

Analysts agreed with Mr Pua. Singapore's retail sector remains resilient, as evidenced by CMT's latest results, Macquarie Research Equities analysts said in a note yesterday. 'CMT remains one of our top Singapore Reit (real estate investment trust) picks, with growth from active leasing, asset enhancements and acquisitions,' it said. Citigroup also issued a 'buy' call on CMT, citing its steady income stream.

CMT has already secured refinancing for $187.5 million and $80 million of loans due in December 2008 and May 2009 respectively and is in the midst of negotiating refinancing for $673.7 million due in August 2009. Both the trust and analysts are confident funding will be secured.

'CMT exists within the enlarged CapitaLand group, and the group as a whole is well supported by local and foreign banks,' said UOB Kay Hian analyst Jonathan Koh. Earlier this month, CapitaLand said that with its various listed entities, it has raised more than $5 billion of debt year-to-date. In May this year, the trust raised its target asset size to $9 billion by 2010, from an earlier forecast of $8 billion. CMT agreed in May to buy The Atrium along the Orchard Road shopping belt for $839.8 million, boosting its assets to $7.2 billion at June 30.

Yesterday also marked Mr Pua's last results briefing at CMT's helm. He quit in September to pursue personal interests. His resignation is a 'big loss' and could threaten the group's ability to grow in the longer term by acquiring under-utilised assets, said Citigroup analyst Wendy Koh. 'However, his departure is unlikely to affect the rental income stream from existing portfolio and major asset enhancement pipeline for existing properties,' she added.

Mr Lim acknowledged that Mr Pua has left 'big shoes' to fill, but is confident that the management team can fill them.

A-Reit's Q2 Distribution Income Up 15%

Source : The Business Times, October 17, 2008

Ascendas Real Estate Investment Trust (A-Reit), Singapore's No. 1 industrial property trust, said on Friday that its second- quarter income distribution to shareholders increased 15 per cent as its tenants paid higher rents.

The trust will distribute S$53.4 million, or 4.01 cents a share, for the three months ended September, from S$46.5 million, or 3.51 cents a year earlier, it said.

Net property income for 1HFY2008/09 increased by 20.4 per cent to S$142.3 million compared to a year ago, of which 46.7 per cent is contributed organically by rental rate increases from both positive rental reversions in the multi-tenanted buildings and stepped rental increases in the single-tenanted buildings.

Despite the slowdown in the economy, barring any significant further deterioration in the economic situation resulting from the global financial turmoil, the manager expects to be able to deliver a return that is in line with its recent performance for the balance of the current financial year.'

As at 30 September 2008, A-Reit has 76.7 per cent of its debt hedged into fixed rate for the next 3.93 years.

Barring any further deterioration in the external economic environment, the manager believes that A-REIT is well-positioned to deliver a DPU for the current financial year that is in line with its recent performance.

Falling Rents May Take Shine Off S-Reits

Source : The Business Times, October 17, 2008

SINGAPORE-LISTED real estate investment trusts, or S-Reits, are now finding favour with analysts.

UOB Kay Hian, for example, upgraded the S-Reit sector from market weight to overweight earlier this month due to the 'overwhelmingly attractive' yield spread. JPMorgan similarly said in a recent report that the Reit model is not broken. The research firm has 'buy' calls on seven S-Reits. Analysts from other research firms have also been recently issuing 'buy' calls on several Reits here.

This is quite a reversal from a year ago, when the S-Reit sector was considered unattractive. Many Reits were facing concerns about their ability to refinance debt amid the credit crunch. Acquisitions, which had been fuelling growth, were also becoming harder to come by.

But now, some of these Reits are seen to be sources of stable, visible and recurrent income in uncertain times. Yields are also at historic highs as stock prices continue their downtrend.

Analysts are now saying that debt refinancing will not be an issue for all Reits. For one, strong sponsors could act as lenders of last resort for Reits and prevent any fire sale of assets. Retail and industrial Reits are the most exposed to refinancing risk. So investors are encouraged to buy those Reits with strong sponsors and avoid certain sectors.

But the one thing that has been largely overlooked in most analyses is the impact of falling rents.

Rents will fall across most sectors - that much is certain. Office trusts, such as K-Reit Asia and CapitaCommercial Trust, will be among the first to be hit.

The massive upheaval in the banking system means that financial institutions are unlikely to continue with any expansion plans yet to be executed. Other businesses will have reduced access to bank credit and scale back expansion plans. With a reduced appetite for space and looming new office supply coming onstream in 2010, landlords are losing their bargaining power and rents will inevitably fall.

Kim Eng Research, for one, expects prime Grade A office rents to fall by up to 15 per cent by the end of 2009.

Rentals for retail Reits will also fall. Already, there are signs from retailers in Reit properties that they cannot afford the high rents being charged at the moment. Retail spot rents are being hit by slowing economic growth and falling visitor arrivals amid increasing supply. Goldman Sachs yesterday said that it expects retail rental rates to fall 15 per cent between now and 2010.

Reits here typically renew their leases on a revolving basis, with a certain fraction of tenants re-signing every year. So those tenants who signed three-year leases last year could be stuck forking out high rentals for another year or two. But tenants renewing their leases soon will ask for lower rents. In a couple of years - say, by 2010 - the bulk of a Reit's tenants could be paying lower rents, leading to lower rental incomes for S-Reits. Their yields are not likely to look so attractive then.

Analysts are now beginning to factor falling rents into their calculations. Goldman Sachs yesterday downgraded K-Reit from 'buy' to 'neutral'. 'We have been positive on K-Reit, given its attractive pricing relative to book value and our expectation that organic growth for the next two years at least will still find good support from positive rental reversions,' said the firm in a report. 'However, we underestimated the focus by investors on the direction of spot rents and were not sufficiently conservative in terms of how far Singapore office rents could decline from their peak.'

However, even with falling rents factored in, S-Reits can be attractive, some maintain. After imposing worst-case operating assumptions for each property sub-segment, including a blowout of financing costs and accelerating the rental reversions to the entire portfolio, Daiwa Institute of Research's David Lum still estimates that all S-Reits could deliver recurrent worst-case yields of at least 6 per cent per year.

But whether making 'buy' or 'sell' calls for S-Reits, it's important to factor in the impact that falling rents will have on S-Reit rental incomes over the next 2-3 years. Refinancing is not the only concern.

OUE Exploring Setting Up Of Listed Property Trust

Source : The Business Times, September 18, 2008

Plan to inject certain hospitality assets; it has appointed professional advisers

OVERSEAS Union Enterprise (OUE) said yesterday that it is looking at setting up a listed property trust into which it will inject 'certain hospitality properties'.

Local asset: Artist's impression of the shopping gallery of Meritus Mandarin, one of OUE properties in Singapore

Professional advisers have been appointed to assist, OUE said in a filing to the Singapore Exchange.

In Singapore, OUE has Meritus Mandarin Singapore and Marina Mandarin Singapore. It also has a beach resort and spa in Malaysia and three hospitality assets in China.

There is no certainty that a listed property trust will be established or that any transaction relating to or involving the company or its subsidiaries will be entered into as a result, OUE said.

'Shareholders should bear the foregoing in mind when dealing in the shares of the company,' it said.

OUE, controlled jointly by Malaysian tycoon T Ananda Krishnan and Indonesia's Lippo Group, said that if it does enter into any definitive transaction relating to a listed property trust, it will make a prompt announcement.

OUE has chosen a 'strange time' to look at listing a real estate investment trust (Reit), a property analyst said yesterday, saying the current market turmoil means new listings are bound to be poorly received.

But if OUE 'takes its time to make up its mind', market conditions might have improved by the time the trust makes it to the market, the analyst added.

Singapore-listed Reits, or S-Reits, are beginning to look attractive compared with developer stocks, some analysts have said lately.

DBS Vickers Research said this month that the share prices of S-Reits have fallen since the start of the Q2 2008 reporting season in July, in tandem with the decline in broader Singapore market.

But the Reit index has done better than developers, the research unit said in a report.

Similarly, in a Sept 16 report DMG & Partners property analyst Brandon Lee said he prefers S-Reits to developers.

He cited the 'constant ammunition of negative newsflow currently being fired at developers' as one reason for this.

'In the near term, we are still recommending the S-Reits, for their earnings visibility and income predictability, as well as higher yields with the recent correction in share prices,' he said.

Three MI-Reit Properties Gain $1.3m In Revaluation

Source : The Business Times, September 5, 2008

Revaluations raise carrying amount for portfolio to $554.1m from $553.6m

THREE properties under MacarthurCook Industrial Reit (MI-Reit) have gained $1.3 million in value from a year ago in the latest revaluation exercise.

MI-Reit's manager, MacarthurCook Investment Managers (Asia) Ltd, yesterday released new independent valuations for seven industrial properties as at Sept 1. The value of four other properties remained unchanged from the previous year.

Together, the seven properties were valued at $227.6 million as at Sept 1, against $226.3 million a year ago.

Their total book value as at June 30, 2008, was $227.1 million.

The revaluations have raised the carrying amount for MI-Reit's portfolio to $554.1 million, up from $553.6 million reported on June 30, 2008.

MI-Reit has 21 properties in its portfolio - 20 in Singapore and one in Japan. Independent valuations for the remaining 14 properties will be obtained throughout the financial year.

For the first quarter ended June 30, MI-Reit reported a distributable income of $6.62 million, 68 per cent higher than in the same period last year.

This followed a 94 per cent increase in net property income to $9.12 million.

Distribution per unit (DPU) rose 55 per cent year-on-year to 2.35 cents in 1Q09. In a press release last month, MacarthurCook Investment Managers (Asia) said that it expects to deliver a DPU that is in line with recent performance for the coming year.

While the US economic slowdown and global inflation could affect Asia, 'we expect the demand for industrial properties in Singapore and in the Asian region to remain healthy on the back of strong prospects for Asia, albeit at a less brisk pace', said CEO and executive director of the Reit manager, Craig Dunstan.

'Given this economic scenario, organic growth in the portfolio will drive returns in the near future,' he added.

'However, we expect to resume our active acquisition growth strategy once capital market conditions improve.'

MI-Reit's units gained 0.5 cents yesterday to close at 76 cents.

The counter has slid around 29.6 per cent from the start of the year.

CCT Signs Up Leases For 77,900 Sq Ft In 2 Office Towers

Source : The Business Times, September 5, 2008

CAPITACOMMERCIAL Trust (CCT) says 77,900 sq ft of office space at Capital Tower and One George Street has been renewed or newly committed for between two and three years.

Three companies account for the leases - JPMorgan Chase & Co, BHP Billiton and Shinhan Bank.

CCT did not reveal the rents.

'Given the Grade A quality of Capital Tower (next) and One George Street (above), they are in line with rates achieved at comparable Grade A office buildings in the respective micro-markets.'- CCT spokesman

But a spokesman said: 'Given the Grade A quality of Capital Tower and One George Street, they are in line with rates achieved at comparable Grade A office buildings - between $16 to $20 per sq ft per month (psf pm) - in the respective micro-markets.'

In July, CCT said it expected 4 per cent of leases at Capital Tower to expire in 2008.

Separately, CCT said yesterday that CapitaLand, which has a 30.92 per cent stake in the Reit, will lease 1,313.2 sq ft of office space at Capital Tower for three years for a total sum of $449,125.92.

CCT described the space as an 'unconventional office unit located on the ninth storey'.

It said the terms of the lease were reviewed by CB Richard Ellis, which confirmed the rent is at market level.

Based on the total rent, the monthly rent works out to about $9.50 psf pm.

JPMorgan Chase & Co is one of CCT's top-10 blue chip tenants, contributing about 3.3 per cent of the trust's gross rental income. It will now occupy an extra one-and-a-half floors at Capital Tower.

BHP Billiton, which has several offices in the CBD, will renew its lease at Capital Tower.

This follows a recent report last month that said BHP Billiton is leasing about 150,000 sq ft at Tower 2 of the upcoming Marina Bay Financial Centre, slated for completion in the second quarter of 2010.

At One George Street, new tenant Shinhan Bank has taken space to grow its business footprint in Singapore.

Lynette Leong, CEO of CCT's manager said: 'The lease commitments are definitely encouraging news.'

She said she is confident the trust will delivering its forecast distribution per unit of 10.61 cents and 12.34 cents for the financial years ending 2008 and 2009 respectively.

Following the completion of the acquisition of One George Street on July 11, CCT's asset size is close to $7 billion, which is ahead of the $6 billion target it set itself by 2009.

Allco Reit Gets BB Long-Term Rating From S&P

Source : The Business Times, August 29, 2008

Agency also places rating on CreditWatch with positive implications

STANDARD & Poor's Ratings Services yesterday said it has assigned its 'BB' long-term corporate credit rating to Allco Commercial Real Estate Investment Trust (Allco Reit).

Anchor Point: The weighted average lease term of 4.8 years for Allco Reit's portfolio is higher than average

At the same time, it placed the rating on CreditWatch with positive implications.

The rating on Allco Reit reflects the trust's smaller asset base compared with its global peers'.

It has nine properties (excluding units in unlisted property fund Allco Wholesale Property Fund).

'Allco Reit also has high tenant concentration, with its top two tenants representing about 30 per cent of the gross revenue of its portfolio,' said Standard & Poor's credit analyst Wee Khim Loy.

'In addition, the trust's market and tenant diversity could decline. Should Allco Reit's manager, Frasers Centrepoint Asset Management (Commercial) Ltd, continue the previous manager's strategy to exit the Australian market and focus on properties in Singapore and Asia, the trust's asset portfolio and cash flow stability would be negatively affected.'

The above weaknesses are partly offset by the quality of Allco Reit's investment portfolio.

The Asian properties, which require minimal capital expenditure, are mostly strategically located in central business districts.

These benefits are complemented by the stable rental cash flow of Australian properties, which are backed by longer term leases.

In addition, the weighted average lease term of 4.8 years for Allco Reit's combined diversified portfolio is higher than the average for comparable real estate investment trusts focusing on Asian office commercial properties.

Allco Reit's nine properties have more than 400 tenants in total, spanning five markets in three countries.

The diversification strength of the investment portfolio provides cash flow stability to the business.

The rating is also supported by the enhanced financial flexibility of Allco Reit following the change in the ownership of its manager.

Impending refinancing risk declined after Allco Reit was 'de-linked' from Allco Finance Group (AFG). Frasers Centrepoint Ltd (FCL) acquired 17.6 per cent of Allco Reit and 100 per cent of its previous manager, Allco Singapore Ltd, from AFG on Aug 14, 2008.

Allco Reit will be eventually renamed Frasers Commercial Trust. FCL is the wholly owned property arm of Fraser and Neave Ltd, a leading consumer group with a satisfactory credit profile.

S&P Assigns BB Long-Term Credit Rating To Allco Reit

Source : The Business Times, August 28, 2008

Standard & Poor's Ratings Services on Thursday said it has assigned its 'BB' long-term corporate credit rating to Allco Commercial Real Estate Investment Trust (Allco REIT).

At the same time, it placed the rating on CreditWatch with positive implications.

'The rating on Allco REIT reflects the trust's smaller asset base compared with its global peers'.

It has nine properties (excluding units in unlisted propertyfund Allco Wholesale Property Fund).

Allco REIT also has high tenant concentration, with its top two tenants representing about 30 per cent of the gross revenue of its portfolio,' said Standard & Poor's credit analyst Wee Khim Loy.

'In addition, the trust's market and tenant diversity could decline. Should Allco REIT's manager, Frasers Centrepoint Asset Management (Commercial) Ltd, continue the previous manager's strategy to exit the Australian market and focus on properties in Singapore and Asia, the trust's asset portfolio and cash flow stability would be negatively affected.'

The above weaknesses are partly offset by the quality of Allco REIT's investment portfolio.

The Asian properties, which require minimal capital expenditure, are mostly strategically located in central business districts.

These benefits are complemented by the stable rental cash flow of Australian properties, which are backed by longer-term leases.

In addition, the weighted average lease term of 4.8 years for Allco REIT's combined diversified portfolio is higher than the average for comparable real estate investment trusts focusing on Asian office commercial properties.

Allco REIT's nine properties have more than 400 tenants in total, spanning five markets in three countries.

The diversification strength of the investment portfolio provides cash flow stability to the business.

The rating is also supported by the enhanced financial flexibility of Allco REIT following the change in the ownership of its manager.

Impending refinancing risk declined after Allco REIT was 'de-linked' from Allco Finance Group (AFG). Frasers Centrepoint Ltd (FCL) acquired 17.6 per cent of Allco REIT and 100 per cent of its previous manager, Allco Singapore Ltd, from AFG on Aug 14, 2008.

Allco REIT will be eventually renamed Frasers Commercial Trust. FCL is the wholly owned property arm of Fraser and Neave Ltd, a leading consumer group with a satisfactory credit profile.

MP Reit Refinances $220 Mln Loan

Source : The Business Times, August 25, 2008

Macquarie Pacific Star, the Manager of MP REIT, said on Monday that MP REIT has entered into a $220 million (US$155 million) club deal with three foreign banks to refinance its loans due end September 2008.

The new two-year loan facility, secured on competitive terms, matures in September 2010.

The $220 million club facility takes a second mortgage security on MP REIT's stakes in Wisma Atria and Ngee Ann City. MP REIT's EUR186.2 million Commercial Mortgage Backed Securities (CMBS) notes, originated in September 2005, are backed by a first priority mortgage loan over these two Singapore properties.

Following the execution of the $220 million club deal, rating agencies Fitch and Moody's have reaffirmed their respective 'AAA' and 'Aaa' ratings for the CMBS.

With the refinancing, MP REIT's gearing remains low at 28.9 per cent.

Lum Chang Wins $76.5m Contract From A-Reit

Source : The Business Times, August 22, 2008

ASCENDAS Real Estate Investment Trust (A-Reit) has awarded a $76.5 million design-and-build contract to a unit of Lum Chang Holdings for the construction of a new eight-storey tower and a three-storey ancilliary podium in Changi Business Park.

The building will be on land with an area of over 28,000 square metres - one of the biggest developments there, Lum Chang said. The project is due to be completed by October 2009.

The contract marks the second time that A-Reit has appointed homegrown construction company Lum Chang for a Changi Business Park development.

In 2007, Lum Chang was awarded a $71.8 million tender to build an eight-storey office building - the first of three towers in the Changi Business Park commercial development.

Construction of this building as well as the basement carpark is currently underway, and progress is well on track for completion in the first quarter of 2009.

The building has been leased to Citigroup to house up to 4,000 operational and backroom staff.

The latest contract brings the total value of contracts Lum Chang still has in progress to over $456 million, the company said.

The newest project is expected to be 60 per cent completed by the end of the financial year ending June 30, 2009.

The earnings from this contract will be recognised progressively according to the stage of completion, Lum Chang said.

Lum Chang's shares lost two cents to close at a 52-week low of 19 cents yesterday. A-Reit's stock similarly shed two cents to end the day at $2.30.

More Flexible Guidelines For M'sian Reits

Source : The Business Times, August 22, 2008

More leeway for expansion, but withholding taxes not addressed

MALAYSIA has announced new real estate investment trust (Reit) guidelines that would give Reit management companies greater flexibility to manage and expand their portfolios, but left the issue of its uncompetitive withholding taxes untouched.

Revised guidelines: Reits can now buy property that is under construction or uncompleted real estate

The new measures - a follow-on to earlier ones announced in the last national budget where foreign shareholders were allowed to hold up to 70 per cent of Reit management companies, from 49 per cent previously - make it easier for Malaysian Reits in terms of acquisitions and fund-raising.

Reit managers would be given more leeway to invest in foreign real estate and a portion of their portfolio can consist of real estate that it does not wholly own or claim a majority stake in.

The Securities Commission's (SC) revised guidelines also allow Reit managers to seek a general mandate from unit-holders for issuing units up to 20 per cent of its fund size, where previously the issuance of any number of new units required the specific approval of unit holders.

Although Reits are still not permitted to acquire non-income generating real estate such as vacant land, they can now buy property that is under construction or uncompleted real estate up to 10 per cent of their total asset value.

Trustees would also have a bigger role to play in related party transactions, with new rules introduced to regulate such transactions.

But the new rules designed to give more management flexibility and to augment investor protection aside, there was disappointment in that the main drag on the industry was not addressed.

Reit managers and analysts have repeatedly stressed the country's high withholding taxes on Reit income make it an unattractive proposition for investors, particularly foreign ones, and have stymied the sector's growth with potential Reit owners preferring to look elsewhere.

While the SC has done a good job trying to relax the sector yet protecting the interest of investors, Quill Capita Trust chief executive Chan Say Yeong said the measures would not boost the industry unless the tax issue was addressed. 'What is more important right now is the withholding tax,' he observed, the lack of attention to the matter in the past three years being a sore point with investors. 'Investors tell us on our roadshows that the government is not serious in promoting the industry.'

Malaysia's withholding tax on Reit dividends received by foreign institutions is 20 per cent or twice the amount Singapore imposes. Individuals are also taxed at 15 per cent.

At 7 per cent, Malaysian Reits might offer higher yields, but after deducting the tax, it is not significantly more attractive than the 5-6 per cent yield offered by Singapore Reits - a reason why they did not perform as well even when the stock market was roaring last year.

Despite these disadvantages, CapitaLand has committed to the listing of a RM2 billion (S$844 million) asset-sized retail Reit on Bursa Malaysia, likely to be the largest Reit in the country.

However, the Finance Ministry's reluctance to lower the taxes has been a source of frustration for players who continue to clamour for a reduction ahead of every national budget - 2009's to be tabled next Friday. At the same time, a number of local owners with large property assets have said they do not discount listing their Reits overseas in more favourable markets.

Why the ministry continues to maintain the rate is unclear as analysts said the funds earned are not huge given Malaysia only has some 11 Reits at present, the average asset size less than RM500 million.

In its statement, the SC also said its prior approval on real estate valuation was now only required where the purchase of a real estate is financed, or re-financed within one year, through the issuance of new units. In all other circumstances, it would conduct a post-review of the valuations to ensure they are reasonable and well-supported.

A-Reit Awards S$76.5m Changi Business Park Contract

Source : The Business Times, August 21, 2008

The building will be on land with an area of over 28,000 sq metres - one of the biggest developments there, Lum Chang said. The project is due to be completed by October 2009.

The contract marks the second time that A-Reit has appointed homegrown construction company Lum Chang for a Changi Business Park development.

The first project was awarded in 2007, is progressing well and is on track for completion in the first quarter of 2009.

MI-Reit's 1Q09 Distributable Income Up 67.8%

Source : The Business Times, August 12, 2008

MacarthurCook Investment Managers (Asia) Limited, the manager of MacarthurCook Industrial Reit(MI-Reit), on Tuesday announced a distributable income of S$6.6 million for the first quarter ended June 30, 2008 -- up 67.8 per cent or S$2.7 million higher than a year ago.

The distribution per unit (DPU) of 2.35 cents for the quarter outperforms the 1Q 2008 DPU of 1.52 cents by 54.6 per cent and exceeds the previous quarter's performance by 5.9 per cent.

The books closure date to determine the entitlement to the 1Q 2009 DPU of 2.35 cents is 20 August 2008 and the date payable is 22 September 2008.

The growth in distribution during the quarter was largely driven by rental contributions from the acquisitions of nine additional properties during the last financial year. In addition, pre-determined rental escalations for two of the properties have contributed to the organic growth of the portfolio.

The manager expects to deliver, for the coming year, a DPU that is in line with its recent performance.

Safety In Reits? Don't Count On It: Analysts

Source : The Business Times, August 4, 2008

Yields are attractive but they are subject to movements in cyclical property market

High yields and strong results are making real estate investment trusts (Reits) stand out in a volatile market. But there is debate over their potential as defensive plays, with some market watchers cautioning that Reits are not necessarily safer bets because of their link to the cyclical property sector.

Most Reits turned in impressive results for the quarter ended June 30, 2008. The 18 which reported their performance before last Friday all achieved higher distributable income and distribution per unit (DPU) over the same period last year.


















Distribution yields reported by the Reits, based on annualised DPUs and last Friday's closing prices, ranged from 4.8 per cent to 11 per cent. Reits which offered yields above 10 per cent included MapleTree Logistics Trust, healthcare-related First Reit and Lippo- MapleTree Indonesia Retail Trust.

Overall, the Reits had an average distribution yield of around 7.8 per cent, offering a spread of over 4.6 percentage points above the 10-year Singapore government bond yield of 3.14 per cent on Friday. Compared with one-year fixed deposit rates which start from around 0.8 per cent, the Reits offered an even wider spread.

Analysts say Reits have largely performed in line with expectations. Their good performances have won them fans - with many trading at discounts to net asset values and thus offering relatively high yields, OCBC Investment Research said in a recent report that investors could 'take a fresh look at S-Reits as defensive vehicles offering stable cash flows and high yields'.

However, others pointed out that Reits still may not match up to traditional defensive plays, including high-yielding blue chips like telcos and banks. While Reits do offer high distribution yields, the sector is influenced by movements in the property market, which tends to be more cyclical compared with, for instance, the telecommunications industry, or even banking, they say.

Distribution yields are also a function of Reits' unit prices, so yields may look high simply because unit prices have dropped, explained one analyst. Considering both capital gains and distributions to investors, Reits have not done as well compared to around a year ago, he added. The FTSE ST Reit Index has fallen by more than 10 per cent since it was launched on Jan 10 this year.

Reit fans, on the other hand, argue that few sectors are completely resistant to economic slowdowns. Also, some Reits may be more resilient because they can lock in leases over several years, which helps stabilise earnings.

Where there is agreement among most of the market watchers BT spoke to is that Reits will continue to generate steady operating results. For those which have locked in leases or are able to gain from higher rental reversions on lease renewal, 'there is a lot of predictability in terms of their earnings and distributions,' said Daiwa Institute of Research analyst David Lum.

With credit conditions staying tough, however, much of the earnings growth will have to come organically. Reits may still acquire properties but they will have to be more selective, analysts say.

Analysts' top Reit picks include Suntec Reit. 'With 32.6 per cent of total office net lettable area up for renewal in FY09, we believe Suntec is well-positioned for rental reversion with current $14 psf signing rents versus passing rent of around $6.30 psf,' said a Citi Investment Research report last week.

CapitaCommercial Trust was another popular choice. Goldman Sachs reiterated its 'buy' call on the Reit, favouring its strong organic growth and 'leadership among office Reits'.