Just out, hot fm SGX announcements,
ARA pledges support of Madam Ho Ching’s views on REITs and waives acquisition fees
3 Aug 2005, Singapore – The ARA Group and its subsidiary companies, ARA Asset Management (Singapore) Limited (“ARASL”) – the manager of Fortune REIT – and ARA Trust Management (Suntec) Limited (“ARATMSL”) – the manager of Suntec REIT pledge their support of the views on the REIT industry given by Madam Ho Ching, Chief Executive Officer of Temasek Holdings Pte Ltd, on 28th July 2005.
The ARA Group is fully committed to the long-term growth of Singapore’s REIT industry and firmly supports carrying out best practices to ensure that the interests of REIT unitholders are upheld. As manager of Fortune REIT and Suntec REIT, the ARA Group pledges to act in the best interests of unitholders. The ARA Group would be pleased to consider any improvements and new practices to enhance the REIT industry in Singapore.
“To show our commitment to the long-term interests of unitholders, the ARA Group will waive our front-end acquisition fees in respect of future deals which Fortune REIT and Suntec REIT may enter into. By doing so, we would like to demonstrate that our motivation is aligned to that of unitholders in the long-term. We believe in the sustainability of the assets’ cash flow and are managing the portfolio with the unitholders’ long-term interests in mind. The ARA Group believes that this waiver should set a new industry standard for REIT managers in Singapore,” commented Mr Justin Chiu, Chairman of the ARA Group.
“The ARA Group concurs with Madam Ho’s concerns regarding the use of financial engineering in REITs. In light of this recent development, we will review the recent proposed acquisitions by Suntec REIT and may initiate discussions with the relevant parties,” expressed Mr. Chiu.
Previous Post on Suntec in this blog
Comments - Finally, a response fm Suntec mgmt. Looks good enough to me. Suntec shares will likely move up tomorrow from the low of $1.16 today.
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5 comments:
Well, finally there is a reponse from ARA regarding the news from Mdm Ho Ching. I think it is a positive response by ARA and especially they have wavied the frond-end acquistion fee, which is around 1%(If I remember correctly), which is a huge amount for the recent acquistion that they are going to do with CDL. The best part is that Suntec is going to dicuss with relevant parties regarding on their acquistion. I think it should have positive effect on Suntec share price when the market opened tomorrow. Vested interest :)
Acquisition fee(payable to the Manager)
1.0% of the acquisition price of any real estate purchased directly or indirectly by Suntec REIT (pro rated if applicable to the proportion of Suntec REIT’s interest in the real estate acquired), but no acquisition fee is payable for the acquisition of the Properties.
Comment:
Yeah, the acquistion fee is 1%, which is around 10 million dollars based on 1 Billion dollars plan. Well, I am wondering how much acquistion fee does the other REIT manager get?
Wednesday August 3, 12:12 PM
UPDATE:Suntec To Review Recent Buys From CityDev,Wing Tai
SINGAPORE (Dow Jones)--The manager of Suntec Real Estate Investment Trust (T82U.SG) Wednesday said it will review the trust's recently proposed acquisitions, and that it may initiate discussions with the parties involved.
The comments by ARA Group, which also manages Fortune Real Estate Investment Trust (F25U.SG), come a week after Temasek Holdings Pte. chief executive Ho Ching warned against "clever financial engineering" aimed at boosting short-term performances that could taint the reputation of Singapore's fledging REIT market.
One of the practices highlighted by Ho was the deferred issue of REIT units when purchasing assets. "Such charades shore up short-term performance indicators at the expense of longer-term pain," she said.
Suntec recently announced the proposed purchase of 11 properties from City Developments Ltd. (C09.SG) and a shopping mall from Wing Tai Holdings Ltd. (W05.SG) for a total of S$1.03 billion, including fees and commissions.
The purchase of the CityDev properties for S$788 million involve a deferred payment of new Suntec units, equivalent to about 9.9% of the purchase price, spread over five years beginning Oct. 2, 2006. CityDev is expected to book a one-time pretax profit of about S$342 million if the deal is completed.
ARA, which is 30% held by Li Ka-shing's Cheung Kong (Holdings) Ltd., also said it will waive front-end acquisition fees for future deals that Fortune REIT and Suntec REIT may enter into.
The waiver applies to the purchase of assets from CityDev and Wing Tai, which hasn't been completed, and will cost ARA around S$10 million, based on figures provided in an announcement by Suntec dated June 30, 2005.
"By doing so, we would like to demonstrate that our motivation is aligned to that of unit holders in the long-term," said ARA Chairman Justin Chiu.
In her speech last week, Ho, the wife of Singapore Prime Minister Lee Hsien Loong, also warned investors to be wary of REIT managers who may ramp up the portfolio size indiscriminately "without due care and regard for quality and sustainable value."
"This agency problem is even more acute if the trust manager is paid based on a percentage of the value of the portfolio it manages, and the size of acquisitions made," she added without referring to a specific REIT or trust manager.
Temasek, Singapore's state-owned investment company, owns large stakes in many of the city-state's largest companies including Singapore Telecommunications Ltd. (T48.SG), DBS Group Holdings Ltd. (D05.SG) and CapitaLand Ltd. (C31.SG), which is the sponsor of CapitaCommercial Trust (C61.SG) and CapitaMall Trust (C38U.sg).
Another Temasek unit, Mapletree Investments Pte. Ltd., is the sponsor of Mapletree Logistics Trust, which became the sixth REIT to be listed in Singapore last week.
Suntec currently owns the shopping mall and most of the office space at Suntec City, Singapore's largest commercial development; while Fortune REIT owns shopping malls in Hong Kong.
Friday August 5, 8:39 AM
SINGAPORE PRESS: A-Reit Mgmt Denies Overpaying For Assets
SINGAPORE (Dow Jones)--The manager of Ascendas Real Estate Investment Trust (A17U.SG), or A-Reit, Thursday denied market speculation that the trust has been overpaying for its asset acquisitions and then leasing back buildings to sellers at higher-than-market rents, the Business Times says.
A-Reit said its purchase price and rentals for such deals are above market values because they often comprise not only the real estate, but also equipment, such as automated storage and retrieval systems (ASRS) in logistics facilities, the paper reports.
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ASRS allow the tenant to make full use of their space, by stacking goods right up to the ceiling.
"Given these features, we can achieve a 10% higher per square foot monthly rental for such space compared with conventional warehouse space rental of S$1 to S$1.20 psf," said Ascendas-MGM Funds Management's Chief Executive Tan Ser Ping, according to the newspaper.
Newspaper Web site: http://business-times.asia1.com.sg
Comment
Well, now after the management from Suntec has response to the deferred payment, the gun is now pointed to AREIT on the Buy and Leaseback method. TODAY newspaper mentioned that Hyflux also sell their buiding to AREIT and lease back from AREIT, which allowed Hyflux to unlock their fund to expand their business.
Friday August 5, 8:20 PM
CapitaLand: No Plans To Drop REIT Acquisition Fees
SINGAPORE (Dow Jones)--CapitaLand Ltd. (C31.SG), Southeast Asia's largest developer, Friday said it doesn't plan to waive or lower the acquisition fees it charges the real estate investment trusts under its management.
"We are not going to reduce or increase the fees. We believe they are very fair," CapitaLand Chief Executive Liew Mun Leong said during a press conference.
CapitaLand manages two of the six listed REITs in Singapore - CapitaCommercial Trust (C61.SG), which is invested in office space and car parks in the city-state, and CapitaMall Trust, which has a portfolio of shopping malls in Singapore.
Acquisition fees charged by REIT managers in Singapore - typically 1% of the purchase price - have come under the spotlight recently after Temasek Holdings Pte. Chief Executive Ho Ching last week warned investors to be wary of managers who build up their portfolios "without due care and regard for quality and sustainable value."
Temasek, Singapore's state-owned investment agency, owns large stakes in many of the city-state's largest companies including Singapore Telecommunications Ltd. (T48.SG), DBS Group Holdings Ltd. (D05.SG) and CapitaLand.
"This agency problem is even more acute if the trust manager is paid based on a percentage of the value of the portfolio it manages, and the size of acquisitions made," Ho said.
Following her remarks, the ARA Group, which manages Singapore-listed Suntec Real Estate Investment Trust (T82U.SG) and Fortune Real Estate Investment Trust (F25U.SG), said earlier this week it will waive front-end acquisition fees for future deals that Fortune and Suntec may enter into.
"By doing so, we would like to demonstrate that our motivation is aligned to that of unit holders in the long-term," said ARA Chairman Justin Chiu. Chiu is also executive director at Hong Kong's Cheung Kong (Holdings) Ltd. (0001.HK), which owns 30% of ARA.
CapitaLand Financial's Chief Executive Kee Teck Koon said there were costs involved in acquisitions. "We need people on the ground and who is going to cover the cost?" he said, citing CapitaCommercial, which is in the midst of looking for overseas assets.
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