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We refer to the letter, ‘Don’t support name change for MPReit’ (BT, Nov 4). As manager of Macquarie Prime REIT (MP REIT), we had in mid-February 2008 embarked on a process of reviewing strategic options for MP REIT aimed at unlocking potential value for MP REIT unitholders.

As indicated in our latest results announcement and press release, due to the increasingly challenging market environment and execution risks encountered during the strategic review period, no firm offer to acquire 100 per cent of MP REIT units or its investments was received. The Macquarie-YTL transaction is a private deal between two independent principals.

In YTL’s press release on Oct 28, 2008, it was mentioned that MP REIT will be renamed Starhill Global REIT. On completion of YTL’s acquisition of Macquarie’s interests in MP REIT, it is expected that Macquarie will require MP REIT to discontinue the use of the Macquarie name as branding for the Reit. We would also like to inform your readers that there is no legal requirement to convene an EGM to approve the change of name of Singapore Reits.

We look forward to working together with the new sponsor, YTL Corp, in the interests of unitholders, in assessing and implementing the new strategic initiatives available to MP REIT. Further announcements will be made at the appropriate time.

Mok Lai Siong
Senior vice-president,
Corporate communications & investor relations
Macquarie Pacific Star Prime REIT Management Limited

Source : Business Times - 05 Nov 2008

MACQUARIE Group, which on Tuesday said it would sell its entire stake in Macquarie Prime Reit and the Reit’s manager to Malaysia’s YTL Corporation for $285 million, is certainly making a neat exit from its investment. However, the interests of minority shareholders, some of whom were waiting for a similar offer for their units, have not been as well served.

When the real estate investment trust (Reit) announced a strategic review in February, the management said it would sponsor the review with the specific objective of enhancing value for all unitholders. ‘The review will consider both corporate and asset-level strategies, including the potential to provide unitholders with a proposal to acquire 100 per cent of (the Reit’s) units,’ management said then.

On Tuesday, Macquarie qualified that, while the review considered the potential to provide unitholders with a proposal to acquire 100 per cent of units, ‘no firm offer was received in the current challenging capital markets environment’.

Having failed to find a buyer for all the units in the Reit, Macquarie decided to sell just its 26 per cent stake in the Reit as well as its 50 per cent interest in the Reit’s manager. The bank wants to redeploy capital in new growth areas. But the deal sells other unitholders - who could have been waiting for a general offer since the February announcement - short.

It is debatable whether Macquarie could have got an offer for all the units in the Reit if it had been willing to accept a much lower price. Some unitholders BT spoke to, at least, are convinced that the bank could have. YTL is paying 82 cents a unit for 247.1 million shares in the Reit. The price is a 52 per cent premium over the last traded price of 54 cents last Friday, the last day of trading before the deal was announced on Tuesday.

The sale has also resulted in a change of sponsor and a fundamental change in terms of strategy and expertise. This should also have been an incentive for management to obtain the same terms for all the unitholders.

YTL’s managing director Francis Yeoh has said that Macquarie Prime will be rebranded as Starhill Global Reit and will be YTL’s main vehicle for acquiring prime retail space in Asia and the West. The YTL group also controls Bursa Malaysia-listed Starhill Reit, the country’s largest Reit with four properties in Kuala Lumpur worth about US$430 million in all. Mr Yeoh has not ruled out the merger of the two Reits - which could change the profile of Macquarie Prime Reit, which currently owns $2.2 billion of retail and office properties in Singapore, China and Japan.

The deal is not the first such transaction this year. In July, Frasers Centrepoint purchased Allco Finance’s 17.7 per cent stake in the then-Allco Commercial Trust (now Frasers Commercial Trust) at a 17 per cent premium to the last traded price - also bringing about a change of sponsor. But the difference between that deal and the Macquarie- YTL deal is that in the case of the latter, there was an implication that a proposal to acquire 100 per cent of the Reit’s units could be forthcoming. A statement between February and October to the effect that no offer for 100 per cent of the units was likely and that Macquarie was now looking to sell its own stake could have avoided this mix-up.

Taking a wider view, there also appears to be a flaw in Singapore’s Reit structure, which allows sponsors to charge high management fees for running the Reit and then obtain superior terms should they decide to exit their investments. Unitholders, who could have bought into a Reit because of the sponsor’s brand name and pipeline, are then left holding a slightly different product. Perhaps there should be a moratorium of several years for sponsors before they can exit the Reit they promoted in the first place.

Source : Business Times - 31 Oct 2008

Q4 distribution income surges 44.5% to $43.9m

WITH credit concerns looming over the market, refinancing is now top of the agenda for Suntec Real Estate Investment Trust (Reit).

‘While we have no major financing needs in the next 12 months, we are keenly aware of the current global financing crisis and liquidity crunch,’ said Yeo See Kiat, CEO of Suntec Reit manager ARA Trust Management (Suntec).

‘Refinancing of our $700 million CMBS loan due in December 2009 is one of our key priorities.’

For FY2009, Suntec Reit has debts of $40 million, $85 million and $700 million maturing in April, May and December respectively. Its gearing ratio at Sept 30 was 31.9 per cent.

But refinancing should not pose a major problem, Mr Yeo said. ‘We have got a good partner in Cheung Kong. The financial institutions know who we are.’

ARA Trust Management (Suntec) is linked to Cheung Kong Group, a major Hong Kong conglomerate.

Mr Yeo was addressing financing concerns at a briefing on Suntec Reit’s results for its fourth quarter ended Sept 30.

It reported a 44.5 per cent year-on-year surge in distribution income to $43.9 million. This drove a 34.6 per cent jump in distribution per unit (DPU) to 2.854 cents.

With an annualised DPU of 11.353 cents, Suntec Reit’s distribution yield was 17.6 per cent based on the closing unit price of 64.5 cents on Oct 29.

According to Suntec Reit, its office portfolio continued to enjoy positive rental reversion during the quarter. The committed occupancy rate at Sept 30 was 99.3 per cent.

Suntec Reit has acquired about 61,500 sq ft of Suntec City strata-titled office space, but is likely to put such growth on hold given today’s business climate, Mr Yeo said.

Also shelved is the redevelopment of Park Mall, he added.

The project could be postponed for one to two years and reviewed when conditions change.

Suntec Reit’s retail portfolio enjoyed an occupancy rate of 99.6 per cent at Sept 30.

Suntec City Mall, Park Mall and Chijmes all saw higher committed passing rents compared with a year earlier.

Investors pushed Suntec Reit’s unit price up 4.5 cents yesterday to close at 69 cents.

Source : Business Times - 31 Oct 2008

Its rental income remains strong in Q3 despite challenging market

MACQUARIE Pacific Star, the manager of MP Reit, said yesterday that the trust’s third-quarter distributable income was $17.2 million.

Distribution per unit (DPU) for the period July 1 to Sept 30 was 1.78 cents, 15.6 per cent higher than 1.54 cents in the previous corresponding period. On an annualised basis, the latest distribution represents a yield of 8.58 per cent.

Gross revenue for MP Reit was $32.6 million, or 24.8 per cent higher than the $26.1 million in the corresponding quarter a year ago. This was driven mainly by higher rents achieved from renewals, new leases and revenue from the overseas properties. Net property income was higher at $23.6 million, an increase of 21.7 per cent from a year earlier.

Stephen Girdis, chairman of Macquarie Pacific Star, said that rental income remained strong in Q3 ‘despite the current challenging market’.

Franklin Heng, Macquarie Pacific Star’s CEO, added: ‘The supply of new office space in Orchard Road in the next few years is limited and we expect to still reap some rent reversions from office leases expiring in the next year.’

Commenting on Tuesday’s announcement that YTL Corporation has entered into a sale-and-purchase agreement to acquire Macquarie Group’s 26 per cent stake in MP Reit and a 50 per cent stake in the holding company of Macquarie Pacific Star, the officials said that in the challenging environment and in the midst of a strategic review, no firm offer to acquire 100 per cent of MP Reit’s units or its investments was received.

‘In light of the above, MP Reit’s strategic review has been concluded and Macquarie Pacific Star looks forward to working with the new sponsor, YTL Corp, in the interests of unitholders, in assessing and implementing the new strategic initiatives available to MP Reit,’ the trust manager said.

MP Reit refinanced $220 million through a club deal with three foreign banks in August 2008. As at Sept 30, MP Reit’s gearing level was 28.9 per cent, and 89.4 per cent of its borrowings were fixed.

It ended trading yesterday up one cent to $0.55.

Source : Business Times - 30 Oct 2008

CAPITARETAIL China Trust (CRCT) reported a 52.6 per cent jump in its distributable income for its 2008 third quarter yesterday and said it has secured refinancing for a US$105 million loan facility maturing soon.

Thanks to strong revenue growth, CRCT reported a distributable income of $12.4 million for the three months ended Sept 30, against $8.2 million for Q3 2007. Gross revenue surged 48.8 per cent to $28.3 million, helped by the $7.8 million in revenue contribution from Beijing’s Xizhimen Mall, which was acquired in February this year.

Distribution per unit (DPU) for the quarter stood at 2.01 cents - or 8.01 cents on an annualised basis - 0.3 cent higher than the DPU from a year ago. Its distributable income for the quarter also beat the Reit management’s $11.3 million forecast by 10.5 per cent.

But CRCT missed its Q3 gross revenue forecast by 2.9 per cent, due to poor performance of the Saihan Mall, which has been undergoing asset enhancement works. Saihan Mall’s Q3 revenue of $883,000 was 60.8 per cent lower than projected.

‘Under the current volatile market conditions, the management will focus on driving organic growth through pro-actively managing our portfolio of assets and prudent cost management,’ said chief executive of CRCT management Wee Hui Kan in a media statement. He added that the company will continue to manage its debt conservatively and has secured ‘comfortable refinancing terms’ for the US$105 million loan facility that is maturing late next month.

The refinancing terms of the loan are based on an interest rate that is ‘within the forecast’ of 5 per cent, and the next major term refinancing is set at 2010, the company said. CRCT’s gearing is 31 per cent and has an interest cover of eight times. Total borrowings stand at $344.2 million, including the US$105 million loan.

The trust’s average portfolio rental rates for new leases and renewals registered 16.9 per cent above forecast, CRCT said, adding that the phase 2 acquisition of Xizhimen mall is still set for completion by Q1 of next year. But CRCT said it expects demand to decline in the second half as many retailers have expanded or leased new space prior to the Olympic Games. CRCT said it has retained $400,000 of its Q3 distributable income to ‘help negate any fluctuating income flow in Q4′.

Source : Business Times - 30 Oct 2008