REIT Financial News - 31 MAR 2010: Slides for K-REIT Asia Investor Meetings April 2010

K-REIT Asia Investor Meetings - April 2010 

REIT Financial News - 31 MAR 2010: Fortune Reit listing document for the Hong Kong Stock Exchange

DUAL PRIMARY LISTING ON THE MAIN BOARD OF THE STOCK EXCHANGE OF HONG KONG LIMITED - AVAILABILITY OF LISTING DOCUMENT AND INFORMATION ON BRIDGING ARRANGEMENTS. See report.

LISTING DOCUMENT DATED 31 MARCH 2010 IN RELATION TO THE DUAL PRIMARY LISTING BY WAY OF INTRODUCTION ON THE STOCK EXCHANGE OF HONG KONG LIMITED. See report.

ANNOUNCEMENT POSTED BY THE MANAGER ON HONG KONG STOCK EXCHANGE WEB-SITE ON 31 MARCH 2010 PERTAINING TO THE PROPOSED DUAL PRIMARY LISTING ON THE MAIN BOARD OF THE STOCK EXCHANGE OF HONG KONG LIMITED. See report.

Key Points

• Application has been made to the Listing Committee for the listing on the Hong Kong Stock Exchange of 1,661,595,267 Units.
• Dealings in the Units on the Hong Kong Stock Exchange are expected to commence on 20 April 2010.
• The Units will be traded on the Hong Kong Stock Exchange in board lots of 1,000 Units each.
  

Stock Target Price - Updated TP by OCBC for CCT and SUNTEC

Updated target price and recommendation by OCBC for CCT and SUNTEC:

• CCT Buy with TP of $1.19
• SUNTEC Reit Buy with TP of $1.44

Latest updates at Stock Target Price.

Stock Target Price - Kim Eng upgrades A-REIT after its issue of ECS and Proactive Capital Management Initiatives

Kim Eng upgrades A-REIT after its issue of ECS and Proactive Capital Management Initiatives, upgraded to Buy with Target Price raised to $2.29.

Latest updates at Stock Target Price.

All about REIT - Rights Issue Part 1: Terms and Definition

REITs normally raise funds for its acquisitions by debts. However, there are certain circumstances that will restrict a REIT from borrowing further. One situation will be the 35% (60% with corporate rating) limit on its gearing (see All About REIT - The Basics Part 4: Gearing Limit) has been reached, such that its debt level cannot be further increased. Sometimes the REIT may be trying to refinance an existing loan, and the refinancing terms may not be favourable and higher interest cost may be incurred. This is especially so during the period of credit crunch after the collapse of Lehman in 2008. Under these circumstances, the REIT may have to raise new funds by equity instead. Rights issue is one way in which a REIT can raise funds by equity. A straight forward description of rights issue is as follows:

The company issues new shares to existing shareholders. Shareholders can take up the new share at a price, or can give up the entitlement.

The above is a very simplistic view of the rights issue, but it covers the main idea. In an actual situation, the company issues rights to the existing shareholders first. These rights are actually entitlements to subscribe to the new shares to be issued. The rights may have a market value and may be traded within a specific window period. The owners of the rights can choose to subscribe to the new shares or give up their entitlement.

In 2009, quite a number of REITs have gone on the path of rights issue to raise funds and strengthen their balance sheets, examples being A-REIT, CapitaMall Trust, CapitaCommercial Trust, Frasers Commercial Trust, K-Reit, Fortune Reit, AIMSAMPI Reit, and Starhill Global Reit.

Following are some terms and information related to rights issues:

Rights to Share Ratio
The number of rights issued per existing share. Example a 1 for 1 rights issue means each existing unit will be issued with one right, which in turn entitles it to one new share. Following the issue of the new shares, the total outstanding shares will be doubled in this case. Another example is FCOT's 3 for 1 rights issue in 2009. 3 new shares has been issued for each existing share, thereby increasing the total outstanding shares by 4 times.

Renounceable Rights
Usually we will see this term being mentioned in the circulars about the rights issue. Renounceable rights means that the rights are transferable and can be traded off if the unit holder does not wish to subscribe to the new shares. The rights can also be non-renounceable, meaning it is non transferable and hence cannot be traded. Most, if not all the rights issue of the REITs in 2009 involved renounceable rights.

Trading of Rights
This applies to the renounceable rights. Usually there will be a window period of 1 to 2 weeks for the rights to be traded in the stock exchange. A temporary counter for the rights will be created for this purpose. Unit holders who do not wish to subscribe to the new shares can sell of their rights for a value determined by the market. After this window period, the unit holder can only choose to subscribe to the new shares, or give up the entitlement.

Subscription price of the new share
The price the owner of the rights need to pay to subscribe for each new share. Normally this will be at a discount to the last traded price of the Reit before the announcement of the rights issue, or to the average share price of the last few days. In the earlier part of 2009 when market is still uncertain, the discount given was rather large, probably to encourage more unit holders to take up the new shares.

Excess Rights
More often than not, some may give up the entitlement to the new shares although they hold the rights. These rights then become the excess rights. Those who choose to subscribe to the new shares with the rights they own can also opt to subscribe to new shares with these excess rights. If the number of applications to the excess rights exceeds the available excess rights, some kind of balloting process will kick in. Usually those who have odd lots of the rights will have priority. Example if you have 999 rights, you will have a high chance to get the 1 excess right for you to make up a full lot of new share.

Pro Forma Figures
The Pro Forma Figures is a set of important figures that are usually presented in the circulars about the rights issue. The pro forma figures are estimated values of important financial figures such as yield, gearing, NAV, revenue, net profit, etc, assuming the rights issue has been carried out at an earlier date, usually 1 year or 6 months ago. The past financial figures will be adjusted accordingly to factor in the effect of the rights issue. It will factor in the reduction in interest payment for debts if the funds raised has been used to pay up loans. If the rights issue comes together with proposed acquisitions of new properties, then the increase in distributable income from these new properties will be factored in. Most importantly, the increase in total outstanding shares will be factored in when calculating the figures such as yield and NAV. The pro forma figures is an important set of figures to look at if you want to estimate the diluting effect of the rights issue. The yield may decrease in the short term due to the increase in the share base, but the pro forma figures will give an idea of yield in the middle to long term after factoring in payment of debts and income from new acquisitions. However, do take note that these are estimated figures, and the actual figures may turn out better or worse.

Related Posts

• All about REIT - Rights Issue Part 2: What happens during a Rights Issue
• All about REIT - Net Asset Value (NAV) and Asset Valuation   
• Other articles from All about REIT

REIT Financial News - 26 MAR 2010: Dual listing of units of Fortune REIT in SEHK passed in EGM

NOTICE OF RESULTS OF EXTRAORDINARY GENERAL MEETING. See report.

Key Points

• Unitholders for Fortune Reit passed the EGM resolution for the dual primary listing of units of Fortune REIT in issue (“Units”) on The Stock Exchange of Hong Kong Limited (the “SEHK”) by way of Introduction.
• Also passed the amendment of the trust deed constituting Fortune REIT dated 4 July 2003 for the purposes of allowing Fortune REIT to comply with the relevant Hong Kong regulatory requirements including the Hong Kong Code on Real Estate Investment Trusts, as well as the Hong Kong real estate investment trust regime in general and to provide for the dual primary listing on the SEHK, in the manner described in the Unitholder’s circular dated 1 March 2010 issued by the Manager.
  

REIT Financial News - 26 MAR 2010: Approval in principle of Fortune Reit's Listing in SEHK

PROPOSED DUAL PRIMARY LISTING ON THE MAIN BOARD OF THE STOCK EXCHANGE OF HONG KONG LIMITED – APPROVAL IN PRINCIPLE OF THE STOCK EXCHANGE OF HONG KONG LIMITED. See report.

Key Points

• SEHK has on 25 March 2010 approved in principle the Listing Application of Fortune REIT.
• The Manager wishes to highlight that this is an approval in principle only. 
• Fortune REIT has not received formal approval from the Securities and Futures Commission of Hong Kong, nor has it received formal approval from the SEHK for the listing of, and permission to deal in, the Units.

Author's Note
We are closer to seeing the first S-REIT to be dual listed. The share price has continue to break new highs, currently in the range of HKD 3.6++.

REIT Financial News - 24 MAR 2010: EXPANSION OF MANAGER'S INVESTMENT POLICY IN FIRST REIT

LETTER TO UNITHOLDERS - EXPANSION OF MANAGER'S INVESTMENT POLICY IN FIRST REIT. See report.

Key Points

• The investment policy has been expanded such that the REIT is no longer confined to assets such as hospitals and nursing homes for its portfolio.
• It can now invest in assets such as facilities for pharmaceutical products.

Author's Note
First Reit has been rather quiet for quite a substantial period in terms of acquisitions of new assets. With this expansion of investment policy, the manager will probably have more options in its acquisition plans.

REIT Financial News - 25 MAR 2010: Cambridge lists new units under the distribution reinvestment plan

LISTING OF NEW UNITS UNDER THE DISTRIBUTION REINVESTMENT PLAN. See report.

Key Points

• 2,585,239 new CIT units have been issued pursuant to CIT’s Distribution Reinvestment Plan
• The New Units will commence trading on the Main Board of Singapore Exchange Securities Trading Limited (the “SGX-ST”) at 9.00 a.m. on 26 March 2010.
• The New Units will rank pari passu in all respects with the existing units in CIT.

Author's Note
CIT is the first S-REIT to have successfully carried out the dividend reinvestment plan. Saizen Reit proposed a similar plan way back in 2009 but abandoned the plan later.

REIT Financial News - 23 MAR 2010: A-REIT'S EARLY REDEMPTION OF €165,000,000 CMBS

A-REIT'S EARLY REDEMPTION OF €165,000,000 CMBS. See report.

Key Points

• Early redemption of the €165,000,000 Class AAA Secured Floating Rate Notes ("P2-AAA-001 CMBS") has been completed today.
• The P2-AAA-001 CMBS were issued on 12 May 2005 by Emerald Assets Limited, a special purpose vehicle, as Euro-denominated notes backed and secured by the cashflows and assets from 23 properties owned by A-REIT with an original expected maturity date falling on 12 May 2012.

Author's Note
This is following A-REIT's earlier announcement to offer the ECS (Exchangeable Collateralised Securities) and Other Capital Structure Enhancement. The early redemption of the €165,000,000 CMBS is part of the capital structure enhancement plan.

REIT Financial News - 22 MAR 2010: Updates by Manager of Cache Logistics Trust

CWT Limited: UPDATE RELATING TO CLT (Cache Logistics Trust). See report.  
 
ARA ASSET MANAGEMENT: IN-PRINCIPLE APPROVAL FOR CAPITAL MARKETS SERVICES LICENCE AND AUTHORISATION OF CACHE LOGISTICS TRUST AS AN AUTHORISED COLLECTIVE INVESTMENT SCHEME. See report.

Key Points

• MAS grants conditional in-principle approval to CLT manager in relation to application for capital markets services licence to conduct real estate investment trust management.
• MAS approves CLT as an authorised collective investment scheme. 

Author's Note
We are one step closer to seeing the launch of Cache Logistics Trust, a new industrial Reit. The IPO should be imminent.

REIT Financial News - 22 MAR 2010: Fortune Reit submits proposal of primary listing to HKSE

PROPOSED DUAL PRIMARY LISTING ON THE MAIN BOARD OF THE STOCK EXCHANGE OF HONG KONG LIMITED – SUBMISSION TO THE STOCK EXCHANGE OF HONG KONG LIMITED. See report.


Author's Note
The news of dual listing of the reit has been favourable to its share price, continues to break new high and closes at HKD 3.51 today. Intraday high of HKD 3.53 is also the new 52 weeks high. The reit rises by 0.9 HK cents despite the broader market weakness.

There is a reminder to exercise caution in dealing with the units of the Reit in the above report as the listing in HKSE is still subject to approval of various parties:
"As the Introduction is subject to the approval of the Hong Kong regulatory authorities as well as the Unitholders at the EGM, the Introduction may or may not occur. There is no assurance that all or any of the relevant approvals in connection with the Introduction will be obtained from the Hong Kong regulatory authorities and/or the Unitholders. The information relating to the Introduction as stated in this announcement is also subject to change. Unitholders are therefore reminded to exercise caution when dealing in the Units. In the event that Unitholders are in doubt when dealing in the Units, they should consult their stockbrokers, bank managers, solicitors, accountants or other professional advisers."

Stock Target Price - TP of Capitacomm by DBS after it announced issue of convertible bonds

Updated Target Price for Capitacomm by DBS after it announced issue of convertible bonds.

Latest updates at Stock Target Price

REIT Financial News - 18 MAR 2010: CCT raises S$225 million 5-year unsecured convertible bonds due 2015

CCT raises S$225 million 5-year unsecured convertible bonds due 2015.
See press release.

Key Points

• S$225.0 million convertible bonds due April 2015 have been fully placed to institutional investors and accredited investors.
• The bonds are unsecured and convertible into new CCT units at a conversion price of S$1.356 per new CCT unit.
• The bonds are at an interest rate of 2.7% per annum, payable semi-annually.
• Net proceeds of the issue for general working capital, asset enhancement and refinancing of existing borrowings.

Author's Note
Following A-REIT's offer of new debt instrument (ECS) for proactive capital management, CCT has followed with its issue of convertible bonds. According to the CEO, the interest rate of the bonds at 2.7% p.a. will help to lower the average cost of debt for the Trust. Based on the latest earnings report presentation slides, the average cost of debt is at 3.9%. The bonds, being unsecured, also helps to preserve CCT’s existing pool of unsecured properties, latest valuation at S$2.8 billion, for any growth opportunities in the future.

REIT Financial New - 16 MAR 2010: A-Reit offer of Exchangeable Collateralised Securities and Other Capital Structure Enhancement

A-REIT Enhances Capital Structure with Proactive Capital Management Initiatives. See full report.


A-Reit: Exchangeable collateralised securities issued by Ruby Assets Pte. Ltd. See full report.

Key Points

• Successful Offering of S$300 million of Exchangeable Collateralised Securities ("ECS") Due 2017 with a Put Option in 2015
• Early Redemption of €165 million Class AAA Secured Floating Rate Notes Due May 2012 at a discount to par
• Extended tenure of S$300 million Term Loan due in March 2010 to March 2017
• Effectively extended A-REIT’s Weighted Average Debt Maturity to 4.5 years

Author's Note
Following FrasersCommercial Trust's issue of the convertible perpetual preferred units (CPPU), A-Reit is making a similar move to offer a innovatively structured debt instrument that is like a convertible bond.

Books and Thoughts - Sowing the Seeds Of Prosperity

Previously I have shared about the books Growing Your Tree Of Prosperity and Harvesting The Fruits Of Prosperity by our local writer Mr Ng Wai Chung. Recently I have just completed his latest book Sowing the Seeds of Prosperity. Unlike the previous 2 books, which are more for advance investors, this latest book is more about the basics of financial planning. It covers a wide range of topics about financial planning, which includes:

• Earning Your Wealth - Your work and income
• Saving Your Income - Income minus expenses
• Investing Your Money - Where to park the money saved
• Protecting Yourself - Insurance
• Giving Your Wealth Away - Wills and legacy

Like the previous books, this book is also written in the Singapore context, so it is recommended for Singaporeans who want to have an overall idea about financial planning. This book will be a good starting point for those who wanted to try out doing financial planning DIY. Even if you are already engaging the services of a financial planner and you do not intend to DIY, it does no harm for you to know what financial planning is all about so that you can make better decisions about the recommendations from your financial planner.


One of the chapters I like in particular is the one that chartered a Singaporean's life into various stages and what to look out for in the different aspects of financial planning. These stages of life include being a student, being a single working adult, being a working adult with family and kids, and being someone who is about to retire. I would say this chapter is a very useful reference especially for students who are about to graduate and embark on a working life. A lot of people, myself included, did not really bother much about financial planning when we were still students. The most we would do was perhaps to purchase a whole life or endowment insurance policy, without really knowing what it is all about and whether we really need it at all. On top of that some may go one step further to invest in some unit trusts based on promised returns printed prominently in the beautiful brochures, without knowing much about the product. Of course I am not trying to say that it is wrong to invest in unit trusts or purchase insurance policies. What I am trying to say is that all these are financial commitment that may have an impact on you in subsequent stages of your life, and it is better to be prudent and understand more about the products first. Following are some real life examples of financial commitment without proper understanding or planning experienced by myself or someone I know:

The first example was what I have experienced myself. Around the time when I was graduating and starting my working life, I bought some unit trusts in the Technology sector just by looking at the historical data that showed unbelievably high returns. I did not follow any financial news then and neither did I bother to check what were the associated sector risks. Unfortunately I bought them when the sector was peaking, and the technology bubble was bursting. My technology funds never recovered from their losses since, and they were in the red even during the massive bull run in 2007.

Another example is that of a friend. During the early stage of working life, he began committing himself in quite a number of insurance polices. Some were investment linked policies which required quite a substantial premium. Gradually his monthly premium ballooned to over a thousand dollars. It was alright when he was still a single, but things were different when he started a family and have a kid. The rather affordable thousand dollars per month premium payment now becomes quite a burden on his cash flow. Of course some may argue that these policies are supposed to protect you and give you a decent return at your old age. I can't argue with that. But you must at least try to find out what are the exit rules if one day you realize you cannot commit further and needs to cancel the policy.


Talking about cancellation of insurance policy, it brings me to another personal experience. I committed to a whole life policy with some savings element when I was a student. Years later, I became more confident about investment matters, and felt that I should buy term insurance and invest the rest of the money myself. I spoke to my insurance agent, and realized that I will incur a loss if I cancel the policy at that point in time, and it would take another 10 years or more for me to break even. So every month I still have to commit a sum of money for the policy, when I know that I could get more coverage buying term insurance, and have more control of my money by investing on my own.

I have to emphasize again that the above examples are not meant to say that it is wrong to buy whole life, endowment or investment linked policies. It may in fact be suitable for someone who has absolutely no idea or no interest in investing on his or her own. Rather, the examples above are more to point out the need to understand whatever financial or insurance products you are committing yourself to. Books like Sowing the Seeds of Prosperity, which is in the local context and explains some concepts about insurance and financial products will be a good starting point. You can also try to ask your insurance agent or financial planner as many questions as possible until you are absolutely comfortable with the product. Most importantly you have to take note that if it is going to be a long term commitment, you should try to find out what happens if there are any changes to your cash flow in the future, like when you get married and have kids.

The book also comes with some practical guides for beginners in different aspects of financial matters. In one of the examples above, I have mentioned about buy term insurance and invest the rest of the money on your own. This is also one of the ideas advocated in the book. There is one section in the book that provides some guidance about how you can go about purchasing a term insurance from NTUC income. There is also a guide for absolute beginners who want to start investing in stocks in SGX. It includes basic matters like opening a CDP account and a trading account.


Although I am not exactly a beginner, overall I have enjoyed reading the book. There are interesting stories of typical Singaporeans and their outlook in financial matters, which I find very interesting especially when I find that it is similar to someone I know, including myself. In terms of subject matter I still prefer the previous 2 books which have more emphasis on generating passive income. Do hope to see the author come up with more books about practical application of Robert Kiyosaki's ideas like cash flow in the Singapore context, which I feel that the previous 2 books have quite successfully achieved.

Stock Target Price - Ascendas Reit, Ascott Reit, Capitacomm, CapitaMall Trust, FrasersCT, LippoMapleTrust, MapletreeLog, SUNTEC Reit

Updated Target Price for Ascendas Reit, Ascott Reit, Capitacomm, CapitaMall Trust, FrasersCT, LippoMapleTrust, MapletreeLog, SUNTEC Reit by OCBC.

Latest updates at Stock Target Price

Stock Movement - 3 MAR 2010: Fortune Reit closes at 52 weeks high of HKD 3.41

Fortune Reit closes at 52 weeks high of HKD 3.41 today.

Author's Note
Following its announcement on Feb 24 to seek dual-primary listing in Hong Kong, the stock price of the Reit has been moving upwards.

The Reit has further announced today that it has made a submission to the securities and futures commission of hong kong for the dual listing. See report.

The Reit closes at HKD 3.01 on Feb 24 prior to the announcement about the dual listing. At the closing price today, the price has moved up by about 13%.