Prime REIT

Extracted from UOB Kay Hian Research Talking Point

Prime REIT: REIT of prime assets

The REIT fever will jump up another notch when IPO of Prime REIT takes place. The REIT will comprise of two prime Orchard Road properties in its portfolio. It's 74% stake in Wisma Atria and 27% stake in Ngee Ann City are worth S$1.3b.

The majority of its valuation from retail (85%) is positive, with the government's initiative to re-juvenate Orchard Road as well as the development of Integrated Resorts. Also, the possibilities of enhancing distribution per unit (DPU) is greater for retail space, given that the manager can re-mix tenants, re-size stores etc.

Prime REIT is offering a yield of about 5.1-5.4%. This is higher than CMT's forecast yield of about 4.1% and Suntec REIT's 5.3%. While CMT has had a growth track record, growth for Suntec REIT has been insignificant to-date. Given the excellent asset location, growth prospects and good DPU yields, Prime REIT is an attractive alternative to both Suntec REIT as well as CMT.

Watch out for REIT's IPO in mid-September.

Properties:	74% of Wisma Atria and 27% of Ngee Ann City
Lease Remaining:	56 yrs for Wisma Atria and 67 yrs for Ngee Ann City
Total Asset Value:	S$1.3b
Equity Raising:	S$915m
Commercial MBS:	S$420m
Debt to Asset:	31%
Initial yield:	5.12 - 5.40%
Indicative range:	S$0.93 - 0.98
Number of units:	581.9 - 629.1m
Financial sponsor:	Macquarie Group (Will hold a stake of 20-25%)
Cornerstone other than Macquarie:	AIA, DBS & Great Eastern (Together upto 13.3% stake)
Growth plans:	Rent increases, acquisitions (Singapore & overseas)
IPO Date:	Slated for mid-September

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