Category Archives: Funds

Moody’s still negative on outlook for Reits

Posted on 19 Mar 2010 | Comments Off on Moody’s still negative on outlook for Reits

PROSPECTS for real estate investment trusts (Reits) in Singapore remain challenging as there will be a greater supply of office, industrial and retail space coming onstream, said Moody’s Investors Service yesterday.

The rating agency kept its outlook for the sector over the next 12 months negative. This places it at the bearish end of the scale compared with two other research houses – DMG & Partners has a ‘neutral’ rating on Reits and OCBC Investment Research recently upped its call to ‘overweight’.

Moody’s was particularly concerned about the influx of office, industrial and downtown retail space at a time of unexceptional economic growth. Its sovereign unit estimates that Singapore’s GDP will expand by around 5 per cent this year.

‘This is below the average GDP growth of 8 per cent from 2004 to 2007 and will not be adequate to absorb the strong increase in supply of commercial properties that was planned before 2008, based upon the then much higher economic growth rate,’ it said in a report.

According to Moody’s, around 6.6 million square foot of new office space will enter the market between this year and 2012. While landlords have managed to secure tenants for more than 30 per cent of the new supply, there will still be pressure on occupancy and rents over the medium term, it said.

When it came to the retail sector, Moody’s was more worried about rents at Orchard Road. This is because about 3.7 million sq ft of new space will be ready in the next two years, some of it at the two integrated resorts.

Moody’s acknowledged that most Reits have been rather resilient and have turned in stable results. But ‘pressure on earnings may increase in 2011 when new supply comes on stream across all property segments if demand is not increased’, it said.

Not all market watchers shared Moody’s view completely. DMG analyst Jonathan Ng agreed that office Reits would face a tougher time as rents continue to slip, but he was neutral about prospects for retail and industrial Reits, and positive on hospitality Reits’ performance.

Mr Ng was not particularly concerned about new retail space coming onstream as pre-commitment rates have been strong.

In a March 4 report, OCBC Investment Research upgraded its call on the Reits sector. Of the eight Reits it covers, five most recently turned in results meeting the house’s forecasts while three did better than expected.

Source : Business Times – 19 Mar 2010

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CCT raising up to $250m from convertible bonds

Posted on 18 Mar 2010 | Comments Off on CCT raising up to $250m from convertible bonds

Most of the funds to be used for asset enhancement and debt refinancing

CAPITACOMMERCIAL Trust (CCT) is planning to raise at least $225 million and up to $250 million through a five-year convertible bond issue to be placed with institutional and accredited investors.

The office Reit, which is partly owned by CapitaLand, plans to use most of the funds (75-90 per cent) for ‘asset enhancement and refinancing of existing indebtedness’, CCT said in an SGX announcement late last night. The remaining funds will be used for general working capital.

Credit Suisse has been appointed the sole bookrunner and lead manager for the issue which is expected to close on or around April 21.

The maximum number of new units to be issued upon conversion will not exceed 10 per cent of the 2.81 billion units in issue as at Dec 31, 2009. In line with Rule 887(1)(a) of SGX-ST’s listing manual, no unitholders’ approval is required in this case.

At its full-year results briefing, CCT said that it had no plans to raise equity citing the lack of acquisition plans.

CapitaLand’s shares tanked on the announcement of its $1.1 billion convertible bond issue in August on concerns over share dilution.

In early January, the trust wrote down the value of its investment properties by $327.6 million and unveiled plans to revamp its portfolio. It said that it would sell Robinson Point to a private fund for $203.3 million and look at redeveloping Starhub Centre at Cuppage Road from an office property to a mainly residential one.

It also reported a downward revaluation of its properties from $6.03 billion in May 2009 to $5.7 billion at end-2009. The writedown follows an earlier one in May, where the value of CCT’s portfolio was reduced from $6.71 billion in December 2008.

CCT owns 11 commercial properties in Singapore, including some older properties in the Central Business District (CBD). It is believed that the funds raised could be used to redevelop Starhub Centre as well as possibly resurrect plans to redevelop the Market Street Car Park into an office development which were shelved last year due to the uncertain market outlook.

In May 2009, CCT announced plans to raise $828.3 million in a rights issue as it looked to cut down its gearing.

Prime office rents in the CBD have been falling and an upcoming glut of office supply is seen contributing to further rental erosion with analysts seeing older buildings as being particularly vulnerable. For example, in January, property firm Savills said that it expected a 20-25 per cent fall in Grade A office rents in Singapore this year.

The Grade A office supply here will rise by 47 per cent between 2010 and 2012, with 7.7 million square feet of space being added, Savills added.

CCT shares were suspended yesterday pending the announcement and remained suspended pending pricing of the bonds. On Tuesday, the stock lost one cent to close at $1.13.

Source : Business Times – 18 Mar 2010

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