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MacarthurCook lodges preliminary prospectus for industrial Reit

Another six real estate investment trusts (Reits) could be listed here by June, said Peter Mitchell, chief executive of the Asian Public Real Estate Association (Aprea).

‘Singapore has 15 Reits now, but there are more in the pipeline,’ said Mr Mitchell in an interview. ‘There will be six more by June, and more by the end of the year.’

One of the six Reits looks set to be MacarthurCook Industrial Reit (MI-Reit), which lodged its preliminary prospectus with the Monetary Authority of Singapore (MAS) yesterday. Others could include one comprising China assets, and another one with assets in India, Mr Mitchell said.

Australian-listed MacarthurCook has been buying industrial properties in Singapore over the past few months to inject into the Reit. Among its purchases was the $115 million warehouse complex UE Tech Park, which it bought from listed United Engineers in December last year.

The filing to MAS said that MI-Reit will consist of 12 industrial properties in Singapore worth $316.2 million at the time of listing. The properties have a total net lettable area of about 195,000 sq m.

Right now, all the Reit’s assets are in Singapore, but it will pursue acquisition opportunities across Asia, the filing said. It added that the Reit is targeting to grow by up to $500 million in new investments per year, focusing primarily on Singapore, China, Hong Kong, Malaysia, Japan and India.

Other than MI-Reit, Mr Mitchell said that a Reit with assets based in China is due to be listed here in the first half of the year. More such Reits - those with China assets - could follow, he said.

And also by June, Singapore will probably see a Reit with assets based in India making its way to the Singapore Exchange. Previous media reports have said that business park developer Embassy Group plans to spin off buildings in a Singapore listing.

Aprea, which aims to promote, represent and develop the publicly traded real estate sector in the Asia-Pacific, was set up in 2005, and now has close to 90 members, including CapitaLand, Mapletree and Frasers Centrepoint, as well as most of the Reits listed here.

Source : Business Times - 22 Mar 2007

426m deal values MetroCentre at 1.07b

GIC Real Estate (GIC RE), the real estate investment arm of the Government of Singapore Investment Corporation, yesterday said it will pay £426 million (S$1.26 billion) to acquire a 40 per cent stake in MetroCentre, the biggest shopping centre in the UK, or indeed, Europe.

GIC RE will be buying the stake from Liberty International, the UK’s third largest listed property company. Liberty’s wholly owned subsidiary Capital Shopping Centres (CSC), which owns 90 per cent of MetroCentre, will sell the 40 per cent stake. The deal values the mall at £1.07 billion.

Under the arrangements with GIC RE, CSC will continue to manage the shopping centre, which is in Gateshead in the north-east of England. The partnership will take on the existing external borrowings relating to MetroCentre, comprising 587 million of commercial mortgage backed securities dated 2015, the partners said in a joint statement yesterday.

The 1.8 million sq ft MetroCentre, which opened in 1986, has since become UK’s premier regional shopping centre. It is Europe’s largest covered retail and leisure centre.

By contrast, VivoCity in Singapore has 1.5 million square feet of gross floor area and 1.1 million square feet of retail space.

CSC acquired MetroCentre in 1995 and has extended and renovated it. The complex, which now has more than 330 shops and other attractions including a bowling alley and multi-screen cinema, draws about 24 million visitors each year.

‘This agreement with Liberty International allows us to work alongside one of UK’s most established property companies and invest in MetroCentre, a leading shopping centre in the north-east of England,’ said Seek Ngee Huat, GIC RE’s president.

‘GIC RE invests in a wide range of property sectors around the world, and this investment is an excellent addition to our global portfolio of retail properties such as our interests in Bluewater Shopping Centre in Kent, UK, Roma Est in Rome, Italy, Sunway Pyramid Mall in Malaysia, and Queen Victoria Building in Australia.’

Liberty said proceeds from the sale will be used to expand the company’s overall business which includes a £1 billion development programme.

The transaction’s completion is subject to the landlord’s consent and ‘certain other conditions which are expected to be satisfied shortly’, the partners said.

GIC RE was advised by Cushman and Wakefield, while Liberty was advised by Morgan Stanley.

Source : Business Times - 14 Mar 2007

Trust will hold property dedicated by Muslims for religious purposes

SINGAPORE may become home to the world’s first Islamic real estate investment trust (Reit).

The trust will hold properties owned by the Muslim community that generate income for charity.

The Islamic Religious Council of Singapore (Muis), the trustee for 200 properties and other assets in Singapore worth $250 million, is conducting a joint study with a ‘major Singapore property developer’ about how to inject properties into a Reit.

This is one of the innovative Islamic financing options that Muis is considering to enhance the ‘annual 4 to 5 per cent returns’ on properties that are known as ‘waqf’, said president Alami Musa yesterday. He was speaking on the sidelines of the Singapore International Waqf Conference.

‘Waqf’ refers to the assets, mainly freehold property, permanently dedicated by Muslims for religious and charitable purposes recognised by Muslim law.

Singapore has ‘established itself as a strong centre for the administration of charities and trusts’ and has introduced measures such as tax changes to make it ‘a centre for the development of waqf’, said Senior Minister Goh Chok Tong yesterday.

Mr Goh was the guest of honour at the conference, which attracted about 230 participants from 13 countries. He noted that Asian and Middle Eastern countries are keen to engage each other and Singapore can play a role in making this ‘an Asia-Middle East Century’.

‘Singapore is well-positioned as a gateway for Middle East companies to expand in Asia. Middle Eastern investors can leverage on Singapore’s networks and knowledge to venture into Asian markets,’ said Mr Goh.

Singapore has already attracted 11 Middle Eastern banks and wants to develop Islamic banking services more fully, he said.

One way is by integrating waqf into Islamic finance using ‘innovative financial solutions’ like a syariah-compliant ‘Musyarakah’ bond launched by Muis. It used the proceeds from a waqf development on Bencoolen Street to fund Islamic education.

To further enhance returns on its waqf fund, Muis has teamed up with a local developer to study the possibility of creating an Islamic waqf Reit, said Mr Alami.

CapitaLand, a sponsor of the conference, said with regard to the possible Reit that ‘it had plans to introduce more syariah-compliant real estate funds to meet the demands of Islamic investors’.

Muis is in talks with key Islamic groups in South Africa and Kuwait to undertake joint projects.

It is also discussing ways to share its trust management expertise and invest in properties overseas with the Islamic Development Bank.

Source : Straits Times - 7 Mar 2007

After three years of outstanding returns, are property equity funds oversold? PATRICK SUMNER explains why Reits should remain part of a well-diversified portfolio

After months of expectation, real estate investment trusts (Reits) are finally here. So far, nine major property companies have announced their intention to convert to the new structure, and we expect another nine to throw their collective hats into the ring by the middle of the year.

Investors were quick to spot this potential opportunity to make early gains before the announcements to convert were made. As a result, UK property stocks were up around 10 per cent in December last year.

But just over a week after the UK Reits launch, Land Securities, British Land and Hammerson, all of which were among the first nine companies to adopt the UK Reits structure, fell sharply as investors took profits.

So should investors be concerned that the case for investing in property funds is built on shaky foundations? Not while the fundamentals remain unchanged.

Property equities are prone to occasional bouts of short-term weakness, but when general investors collect profits and move out, the long-term institutional investors are keen to step in to take their place. With future forecasts anticipating no further fall in yields, it is not unreasonable to expect growth of 12-15 per cent in 2007.

Despite the recent short-term sell-off, demand for property investment from pension funds, insurance companies and private investors is still very healthy. That is a solid driver that isn’t going to change in the short term. Property equities are recognised as a safe, long-term asset class offering diversification benefits and displaying both equity and bond characteristics. For these reasons property will remain popular with investors of a maturing risk/return profile that are searching for yield.

Commercial concerns

Demand for commercial property within Europe and the UK is still outstripping supply and, importantly, portfolio quality within the major property companies remains very high. They hold good quality office space (especially within central London) and are continuing to benefit from high employment levels and strong rental growth. The retail sector offers very consistent, positive rental growth from tenants, especially at the prime end of the shopping centre market.

We are starting to see increased allocation from US institutions keen to seek returns in excess of those that can be achieved domestically, but under a recognisable investment structure such as Reits.

A further positive indicator is the example of Australia, where currently 9 per cent of every worker’s payroll goes directly into pensions. Of this a significant amount finds its way into real estate. The UK and Europe still has a long way to go before property investment reaches those levels.

It would be a mistake to confuse residential markets with commercial markets. Clearly 12 square metre apartments in London and broom cupboards in Chelsea selling for silly prices do attract ‘bubble’ headlines, but commercial property is not synchronised with residential property and property shares have very little exposure globally to the housing market.

While consumer debt does remain a concern, especially in the UK, where the fear of rising interest rates is unsettling borrowers, within commercial property, rising interest rates are not necessarily a bad thing.

Assuming that interest rates rise in response to higher inflation and stronger economic growth, commercial property income will also rise. There is also a strong correlation within the UK and Europe between rental growth and inflation. So again, commercial property investment is a valuable hedge against interest rate and inflation rises.

With such large inflows into property equity companies over the past couple of years, the concern must be whether there is enough capacity within the larger companies to keep absorbing this money. Without any new issuance coming to market, there is a danger of prices pushing up beyond fair value. Small corrections such as the one experience in January are therefore quite welcome, as another year of returns of more than 20 per cent would lead us to rethink the positioning of our portfolio in anticipation of a nastier correction to come.

Investors will do well to ignore the 40 per cent-plus headline-grabbing returns of the last three years and remember that property equities are a very useful diversifier, offering low volatility and long-term stable growth. Investors should also be looking for geographical diversification, to take advantage of the various economic cycles.

We won’t see the returns that we have seen over the past two to three years, but a period of lower double-digit returns in 2007 would be no bad thing, and it certainly doesn’t undermine the long-term case for investing in property equities as part of a diversified investment portfolio.

The writer is head of property equities at Henderson Global Investors

Source : Business Times - 21 Feb 2007

Announcement comes ahead of its results today

PROPERTY giant CapitaLand yesterday said it will take a 13 per cent stake in a Japan-listed real estate investment trust (Reit) for 3.23 billion yen (about $41 million).

Once the transaction is completed, the developer will be the largest shareholder in the Reit - BLife Investment Corporation - which is listed on the Tokyo Stock Exchange.

CapitaLand also said it will acquire a 33.4 per cent stake in BLife’s manager, Morimoto Asset Management Co Ltd (MMAM), for 200.4 million yen.

The company said in a filing to the Singapore Exchange: ‘These two transactions will create a new Reit platform for CapitaLand in Japan.’

Listed in March last year, BLife has a current market capitalisation of about 23 billion yen. Its main sponsor is Morimoto Co Ltd, an established developer based in the Tokyo region. Morimoto is also the majority shareholder in MMAM, having a 50.1 per cent stake.

CapitaLand said it will acquire its stake in BLife by subscribing to 6,400 new units of the Reit at 504,261 yen per unit through its indirect wholly owned subsidiaries CapitaLand Japan Investments Pte Ltd (Japan Branch) and CapitaLand Nippon Investments Pte Ltd.

The new units issued are part of a private placement exercise by BLife where the proceeds will be used to buy three new properties in March 2007, CapitaLand said.

The announcement comes as the company - South-east Asia’s largest developer - gets ready to announce its fourth-quarter results today.

Net profit is likely to come in at around $129 million for the three months ended Dec 31, up 38.4 per cent from $93.2 million a year earlier, according to the median estimate of five analysts surveyed by Bloomberg News.

The forecasts ranged from $93 million to $235 million, Bloomberg said.

David Lum, senior investment analyst at Daiwa Institute of Research, expects CapitaLand to post a $190.5 million net profit for the fourth quarter, boosted by revaluation gains in its associated Reits, CapitaMall Trust and CapitaCommercial Trust, as well as good performances by subsidiaries Ascott and Australand.

The group’s residential business unit is expected to be a star performer this year.

CapitaLand plans to offer as many as 1,200 apartments in Singapore in 2007, 26 per cent more than the 954 it sold for $1.23 billion in 2006, Patricia Chia, chief executive of the CapitaLand Residential Singapore unit, said last month.

She said that about 80 per cent of CapitaLand’s upcoming homes in Singapore this year will be in the prime districts and may sell for more than $1,800 per square foot while some ’super luxury’ developments may be priced at more than $3,000.

Source : Business Times - 14 Feb 2007