20130909-Maybank_KERPL-REIT_DEALS_for_the_week_of_2_Sep_2013_–_6_Sep_2013_15页_1mb

Real Estate Investment Trusts (REITs) Summary

Core Content

This document provides a comprehensive overview of the regional REIT market as of 30 June 2013, highlighting key developments, market performance, and interest rate trends. It also includes specific updates on REIT deals and news, particularly focusing on Frasers Centrepoint Ltd (FCL) and AIMS AMP Capital Industrial REIT (AA Reit).

Main Points

REIT Deals

• FCL's Bid for Yishun Plot:

  • Frasers Centrepoint Ltd (FCL) made a significant bid of S$1,077 psf for a mixed-use commercial and residential plot at Yishun Central 1, which is 47% above the second-highest bid from a Far East consortium.
  • The bid is 103% above CapitaLand's bid of S$531 psf.
  • The plot is adjacent to the Northpoint mall, and the development plan includes a 12-storey integrated complex with 900 residential units, a retail mall, a bus interchange, and a community club.
  • The commercial space comprises 27% of the total GFA (1.33m sqft).
  • The residential units are expected to launch in 2014 with an ASP of S$1,300–S$1,450 psf.
  • The development is expected to be a sponsor injection into Frasers Centrepoint Trust (FCT).

• AA Reit's Expansion at 20 Gul Way:

  • AA Reit has initiated Phase 2E and Phase 3 of its largest asset at 20 Gul Way.
  • The project is expected to add S$89.4 million to the asset's valuation, raising its total asset value to S$306.4 million.
  • The GFA will increase to 1.66 million sqft.
  • The total development cost is estimated at S$77.2 million, to be funded via existing debt facilities and a private placement of S$110 million.
  • A lease agreement with CWT Ltd has been signed for the new GFA, with rental income projected at S$6.3 million in the first year.
  • The new CEO, Koh Wee Lih, will take over in January 2014.

Market Performance

• Regional REIT Market:
  • The market was directionless ahead of the FOMC meeting on 17–18 September 2013.
  • S-REITs were flattish, HK-REITs fell 1.7% WoW, and M-REITs rose 0.4% WoW.
  • The US risk-free rate hit 3.0%, a two-year high, influencing bond yields in Singapore and Hong Kong.
  • S-REITs were 12%–20% below their levels from 22 May, and 17%–23% below their 52-week highs.

Interest Rates and Yield Spreads

• Figure 2: Key Interest Rates
  • SG 10Y Govt Bond yield was 2.75%, with a 1M change of 4.9% and YoY change of 41.3%.
  • HK 10Y Govt Bond yield was 2.55%, with a 1M change of 7.1% and YoY change of 192.5%.
  • MY 10Y Govt Bond yield was 3.89%, with a 1M change of 3.1% and YoY change of 41.3%.
  • THAI 10Y Govt Bond yield was 4.37%, with a 1M change of 5.0% and YoY change of 86.2%.
  • US 10Y Govt Bond yield was 2.93%, with a 1M change of 85.7% and YoY change of 117.7%.
  • Yield Spread between REIT yields and risk-free rates was 382 bps for S-REITs, 291 bps for HK-REITs, and 154 bps for M-REITs.

REIT Performance Table

• S-REITs:

  • Market Cap: S$54,208m, 5D ADTV: S$56m.
  • YTD change: -6.3%, YoY change: -8.8%.
  • Yield: 6.6% FY13, Price-to-book: 1.00.

• HK-REITs:

  • Market Cap: HKD162,418m, 5D ADTV: HKD41m.
  • YTD change: -4.9%, YoY change: -7.1%.
  • Yield: 5.5% FY13, Price-to-book: 0.78.

• M-REITs:

  • Market Cap: M$2,847m, 5D ADTV: M$3m.
  • YTD change: -3.4%, YoY change: -2.7%.
  • Yield: 7.0% FY13, Price-to-book: 0.95.

Key Information

• Yishun Development:

  • The HDB's "Remaking Our Heartland" programme includes over 15,000 new residential units to be completed by 2018, with the new Khoo Teck Puat Hospital and rejuvenation of Yishun Pond and Park.
  • The Yishun plot is strategically located near the MRT station, which is a key factor in its high valuation.
  • The consultants expect S$1,300–S$1,450 psf for residential units and S$7,864.47 psf for the second-highest bid.

• Frasers Centrepoint Trust (FCT):

  • FCT is expected to benefit from the new mall as a sponsor injection.
  • Northpoint and Causeway Point were previously valued at S$2,420 psf and S$2,126 psf, respectively.
  • The Yishun plot is seen as a strategic move to reinforce FCL's shopping centre presence in the Northern area.

• US Market Context:

  • The US August payrolls added 169,000 jobs, below expectations.
  • The Fed is expected to reduce QE in the coming months, with tapering of bond purchases.
  • Quantitative Easing is still seen as a necessary tool for a recovery economy.

Summary of Key Trends

• Market Volatility:

  • The regional REIT market was directionless due to uncertainty around the Fed's QE tapering.
  • S-REITs and HK-REITs showed mixed performance, with HK-REITs down and M-REITs slightly up.

• Yield and Valuation:

  • S-REITs had a Yield of 6.6% FY13, with Price-to-book at 1.00.
  • HK-REITs had a Yield of 5.5% FY13, with Price-to-book at 0.78.
  • M-REITs had a Yield of 7.0% FY13, with Price-to-book at 0.95.

• Interest Rates:

  • The US risk-free rate was at 3.0%, influencing bond yields in Singapore and Hong Kong.
  • Yield spreads were 382 bps for S-REITs, 291 bps for HK-REITs, and 154 bps for M-REITs.

• Development Trends:

  • FCL and AA Reit are making strategic investments in mixed-use developments.
  • FCL aims to reinforce its shopping centres in the Northern area.
  • AA Reit is focusing on value unlocking and portfolio growth.

• Market Outlook:

  • Analysts expect positive outcomes from the Yishun development, with strong demand for residential units due to location advantages.
  • The US market remains uncertain, with concerns about potential military action in Syria and economic recovery.

Conclusion

The document highlights the strategic moves of major REITs in Singapore, Hong Kong, and Malaysia, particularly FCL and AA Reit, as well as the market dynamics influenced by interest rates and economic conditions. The Yishun plot and the FCT's potential sponsor injection are seen as key developments for the shopping centre sector. The REIT market is volatile, with mixed performance across regions, and analysts remain optimistic about future growth and value creation.