Research from SooChow CSSD Capital Markets (Asia), SCCM Asia Research

SCCM Asia Research

Research from SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/prime-us-reit" target="_blank" data-smartkarma-citation="entities:28144" rel="noopener">Prime US REIT (PRIME SP)</a> to acquire two properties in California and Florida; DPU accretive by +2.4% but -1.2% NAV dilutive</h3><ul><li>PRIME, through KBS Realty Advisors, has entered into a purchase agreement with Sorrento Towers North to acquire Sorrento Towers (located at 5355 &amp; 5375 Mira Sorrento Place, San Diego, California) and a purchase agreement with CP OTC to acquire the property One Town Center (located at One Town Center, Boca Raton, Florida). Sorrento Towers is a freehold property comprised of two, seven-story, Class-A office towers and sits above a three-level podium garage with an occupancy rate of 95.6%, NLA of 296,327sqft and WALE By NLA of 6.6 years. One Town Center is a freehold 10-storey Class-A office tower and a five-storey attached parking garage with an occupancy rate of 94.7%, NLA of 191,294sqft and WALE by NLA of 6.2 years</li><li>The aggregate purchase consideration payable for the Acquisitions is US$245.5m, comprising US$146.0m for Sorrento Towers and US$99.5m for One Tower Center. Sorrento Towers would be acquired at valuation, whilst One Town Center will be acquired at a discount of 2.5% of its appraised value, representing an aggregate discount of 1%. The estimated total cost for the acquisitions is US$247.71m, including fees, which will be funded by a combination of loans and a private placement of new units (to raise gross proceeds of at least US$80.0m)</li><li>The Acquisitions will expand the REIT’s footprint in two new target markets, San Diego and Boca Raton. Post-acquisitions, no single market will contribute more than 11.7% of PRIME’s enlarged portfolio Cash Rental Income. In aggregate, the acquisitions have a long WALE of 6.5 years by NLA and 6.6 years by Cash Rental Income, with minimal proportion of leases expiring before 2025</li><li>100% of the leases at Sorrento Towers and One Town Center, based on Cash Rental Income for the month of Mar21, offers visible organic growth having a built-in rental escalation with a weighted average built-in escalation rate of c.3% pa. Moreover, both Sorrento Towers and One Town Center have positive office market dynamics with in-place rents that are currently below market</li><li>At the purchase price, the implied capitalisation rate for Sorrento Towers and One Town Center is approximately 5.3% and 5.8%, respectively. On a pro-forma 1Q21 basis, the WALE of the enlarged portfolio will increase to 4.5 years by NLA and 4.6 years by Cash Rental Income. On a pro-forma FY20 basis, the acquisitions are expected to be +2.4% DPU accretive, but -1.2% NAVPU dilutive. Gearing will increase to 39.1% from 33.8% as at 31Mar21 on a pro-forma basis.</li></ul><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/214/962/original/image003+%282%29.png?1624498042" class="editor-image img-responsive" data-smartkarma-image-id="214962"></figure><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/214/963/original/image004.png?1624498057" class="editor-image img-responsive" data-smartkarma-image-id="214963"></figure></section>

SingaporePrime US REIT (PRIME SP) to acquire two properties in California and Florida; DPU accretive by +2.4% but -1.2% NAV dilutivePRIME, through KBS Realty Advisors, has entered into a purchase agreement with Sorrento Towers North to acquire Sorrento Towers (located at 5355 &amp; 5375 Mira Sorrento Place, San Diego, California) and a purchase agreement with CP OTC to acquire the property One Town Center (located at One Town Center, Boca Raton, Florida). Sorrento Towers is a freehold property comprised of two, seven-story, Class-A office towers and sits above a three-level podium garage with an occupancy rate of 95.6%, NLA of 296,327sqft and WALE By NLA of 6.6 years. One Town Center is a freehold 10-storey Class-A office tower and a five-storey attached parking garage with an occupancy rate of 94.7%, NLA of 191,294sqft and WALE by NLA of 6.2 yearsThe aggregate purchase consideration payable for the Acquisitions is US$245.5m, comprising US$146.0m for Sorrento Towers and US$99.5m for One Tower Center. Sorrento Towers would be acquired at valuation, whilst One Town Center will be acquired at a discount of 2.5% of its appraised value, representing an aggregate discount of 1%. The estimated total cost for the acquisitions is US$247.71m, including fees, which will be funded by a combination of loans and a private placement of new units (to raise gross proceeds of at least US$80.0m)The Acquisitions will expand the REIT’s footprint in two new target markets, San Diego and Boca Raton. Post-acquisitions, no single market will contribute more than 11.7% of PRIME’s enlarged portfolio Cash Rental Income. In aggregate, the acquisitions have a long WALE of 6.5 years by NLA and 6.6 years by Cash Rental Income, with minimal proportion of leases expiring before 2025100% of the leases at Sorrento Towers and One Town Center, based on Cash Rental Income for the month of Mar21, offers visible organic growth having a built-in rental escalation with a weighted average built-in escalation rate of c.3% pa. Moreover, both Sorrento Towers and One Town Center have positive office market dynamics with in-place rents that are currently below marketAt the purchase price, the implied capitalisation rate for Sorrento Towers and One Town Center is approximately 5.3% and 5.8%, respectively. On a pro-forma 1Q21 basis, the WALE of the enlarged portfolio will increase to 4.5 years by NLA and 4.6 years by Cash Rental Income. On a pro-forma FY20 basis, the acquisitions are expected to be +2.4% DPU accretive, but -1.2% NAVPU dilutive. Gearing will increase to 39.1% from 33.8% as at 31Mar21 on a pro-forma basis.

ASEAN Builder's Scoop (24Jun21) - PRIME Acquires US Offices

<h2>Singapore</h2>
<h3>Ang Mo Kio 99-year private housing plot draws 15 bids while EC plot in Tengah draws seven bids</h3>
<ul>
<li>A 99-year leasehold private housing site in Ang Mo Kio Avenue 1, opposite the Bishan-Ang Mo Kio Park, has drawn 15 bids in a state tender. The highest bid of S$381.38m, or nearly S$1,118psf ppr, came from a 60:20:20 joint venture between UOL Group Ltd (UOL SP), Singapore Land Group Limited (SPLG SP) and Kheong Leong Company. This was 6.3% higher than the second highest bid of S$358.89m or S$1,052psf ppr from Titus Residential SG, a tie-up between City Developments Ltd (CIT SP) and MCL Land. Also bidding for the site was a tie-up between Far East Organisation, Sino Group and Sekisui House, which offered S$353.33m or $1,036psf ppr. UOL plans to develop a 24-25 storey project of more than 370 units that will enjoy unblocked views of the Bishan-Ang Mo Kio Park, Lower Peirce Reservoir Park and Shangri-la Park landed housing estate. It is also a timely replenishment for UOL’s land bank</li>
<li>Also closing was the tender for the maiden EC housing site in the Tengah estate. The 99-year leasehold plot in Tengah Garden Walk drew seven bids. The highest offer of S$400.3m, or S$603.17 psf ppr, was from a tie-up between CIT and MCL Land; it was just a tad higher than the nearly S$400.2m or S$602.99psf ppr from the second highest bid, from CSC Land Group. The top bid marks a record land rate for an EC site under the GLS programme. The previous high was S$583psf ppr garnered by the Sumang Walk EC site awarded in Mar18.</li>
</ul>

Singapore
Ang Mo Kio 99-year private housing plot draws 15 bids while EC plot in Tengah draws seven bids

A 99-year leasehold private housing site in Ang Mo Kio Avenue 1, opposite the Bishan-Ang Mo Kio Park, has drawn 15 bids in a state tender. The highest bid of S$381.38m, or nearly S$1,118psf ppr, came from a 60:20:20 joint venture between UOL Group Ltd (UOL SP), Singapore Land Group Limited (SPLG SP) and Kheong Leong Company. This was 6.3% higher than the second highest bid of S$358.89m or S$1,052psf ppr from Titus Residential SG, a tie-up between City Developments Ltd (CIT SP) and MCL Land. Also bidding for the site was a tie-up between Far East Organisation, Sino Group and Sekisui House, which offered S$353.33m or $1,036psf ppr. UOL plans to develop a 24-25 storey project of more than 370 units that will enjoy unblocked views of the Bishan-Ang Mo Kio Park, Lower Peirce Reservoir Park and Shangri-la Park landed housing estate. It is also a timely replenishment for UOL’s land bank
Also closing was the tender for the maiden EC housing site in the Tengah estate. The 99-year leasehold plot in Tengah Garden Walk drew seven bids. The highest offer of S$400.3m, or S$603.17 psf ppr, was from a tie-up between CIT and MCL Land; it was just a tad higher than the nearly S$400.2m or S$602.99psf ppr from the second highest bid, from CSC Land Group. The top bid marks a record land rate for an EC site under the GLS programme. The previous high was S$583psf ppr garnered by the Sumang Walk EC site awarded in Mar18.


ASEAN Builder's Scoop (27May21) - AMK Site Drew High 15bids

<h2>Singapore</h2><h3>SREITs results in a glance (see detailed spreadsheet and calendar attached)</h3><table class="table table-striped"><tbody><tr><td style="width: 162.6pt;"> </td><td style="width: 162.5pt;">ECWREIT</td><td style="width: 162.5pt;">SASSR</td><td style="width: 162.5pt;">BHGREIT</td></tr><tr><td style="width: 162.6pt;">Period</td><td style="width: 162.5pt;">1Q21</td><td style="width: 162.5pt;">1Q21</td><td style="width: 162.5pt;">1Q21</td></tr><tr><td style="width: 162.6pt;">Gross Revenue (S$ m)</td><td style="width: 162.5pt;">30.8 (+30.9% YoY)</td><td style="width: 162.5pt;">EMA Rental Income: 34.1 (+23.4% YoY)</td><td style="width: 162.5pt;">Not Disclosed</td></tr><tr><td style="width: 162.6pt;">NPI (S$ m)</td><td style="width: 162.5pt;">27.7 (+30.9% YoY)</td><td style="width: 162.5pt;">EMA Rental Income (Excluding straight-line adjustments): 32.3 (+27.8% YoY)</td><td style="width: 162.5pt;">Not Disclosed</td></tr><tr><td style="width: 162.6pt;">DPU (S$ c)</td><td style="width: 162.5pt;">1.53</td><td style="width: 162.5pt;">1.759 (+31.9% YoY)</td><td style="width: 162.5pt;">Not Disclosed</td></tr><tr><td style="width: 162.6pt;">NAV per Unit (S$)</td><td style="width: 162.5pt;">0.91</td><td style="width: 162.5pt;">0.922</td><td style="width: 162.5pt;">Not Disclosed</td></tr><tr><td style="width: 162.6pt;">P/B (x)</td><td style="width: 162.5pt;">0.81</td><td style="width: 162.5pt;">1.00</td><td style="width: 162.5pt;">0.64(Based on 4Q20 NAV)</td></tr><tr><td style="width: 162.6pt;">Occupancy (%)</td><td style="width: 162.5pt;"> 99.1</td><td style="width: 162.5pt;">93.5</td><td style="width: 162.5pt;">92.1</td></tr><tr><td style="width: 162.6pt;">Reversion (%)</td><td style="width: 162.5pt;"> NA</td><td style="width: 162.5pt;">Not Disclosed</td><td style="width: 162.5pt;">Not Disclosed</td></tr><tr><td style="width: 162.6pt;">Gearing (%)</td><td style="width: 162.5pt;">38.3</td><td style="width: 162.5pt;">27.6</td><td style="width: 162.5pt;">35.6</td></tr><tr><td style="width: 162.6pt;">Cost of Debt (%)</td><td style="width: 162.5pt;">4.1</td><td style="width: 162.5pt;">3.3</td><td style="width: 162.5pt;">3.8</td></tr><tr><td style="width: 162.6pt;">1 Yr Fwd Yield (%)</td><td style="width: 162.5pt;">7.76</td><td style="width: 162.5pt;">7.46</td><td style="width: 162.5pt;">NA</td></tr><tr><td style="width: 162.6pt;">Debt Hedged (%)</td><td style="width: 162.5pt;">100% of offshore facilities</td><td style="width: 162.5pt;">Not Disclosed</td><td style="width: 162.5pt;">60% of offshore loans</td></tr><tr><td style="width: 162.6pt;">Target Price</td><td style="width: 162.5pt;">Under Review</td><td style="width: 162.5pt;">NA</td><td style="width: 162.5pt;">NA</td></tr><tr><td style="width: 162.6pt;">Rating</td><td style="width: 162.5pt;">Under Review</td><td style="width: 162.5pt;">NA</td><td style="width: 162.5pt;">NA</td></tr></tbody></table><h3><a href="https://www.smartkarma.com/entities/ec-world-reit" target="_blank" data-smartkarma-citation="entities:22842" rel="noopener">EC World Reit (ECWREIT SP)</a> 1Q21 DPU +32.3% YoY; Robust growth but DI retention persist with retained DI snowballing to S$5.49m</h3><ul><li>Both revenue and NPI grew by 30.9% YoY in 1Q21 to S$30.8m (26.9% BB est.) and S$27.7m (28.1% BB est.), respectively, mainly due to absence of rental rebates in 1Q20 and strengthening of RMB. In RMB terms, gross revenue and NPI were 26.0% and 26.1% YoY higher, respectively</li><li>1Q21 DPU increased 32.3% YoY or 7.4% QoQ to S$1.532c (26.9% BB est.), mainly due to absence of rental rebates given. ECWREIT continued to retain 10% of DI in 1Q21 (vs. 10% in 4Q20 and 5% in 1Q20) on a conservative view of uncertainties arising from prolonged COVID-19 pandemic globally and for general working capital purpose</li><li>ECWREIT has secured renewal of major lease at Hengde Logistics, extending WALE to 3.2 years (by GRI) from 3.1 years as at 31Mar21. ~11.8% of GRI will be due for renewal for the remaining of FY21E</li><li>Portfolio occupancy remains robust at 99.1% (vs. 99.3% in 4Q20 and 96.7% in 3Q20)</li><li>On 30Apr, ECWREIT announced an incident of a displacement and collapse of a berth at Chongxian Port Investment that resulted in the damage of two gantry cranes located within the vicinity of the berth. Due to the location of the damaged area, the operations at the damaged berth and the 2 adjacent berths have been suspended. The rest of the port operation is not affected. The cause of the incident is still being investigated. ECWREIT is working closely with the insurer to assess the quantum of revenue loss and property damage recoverable by insurance claims</li><li>Portfolio gearing stands at 38.3% (vs. 38.1% in 4Q20 and 38.6% in 1Q20) with average cost of debt of 4.1% pa. (vs. 4.2% in 4Q20 and 4.3% in 1Q20) and 100% of offshore facilities hedged</li><li>ECWREIT currently trades at 7.76% FY21E yield and 0.81x P/B.</li></ul>Comments: 1Q21 revenue and NPI came in at 26.5% and 26.0% of our full-year FY21E estimates, respectively. Meanwhile, 1Q21 DPU came in at 27.5% of FY21E estimates. Note that we have assumed a 10% DI retention for FY21E, the higher than expected 1Q21 DPU was due to a lower 1Q21 tax rate at 24.7% (vs. our projected 38.0%). Including 1Q21’s S$1.38m, total retained DI since 1Q20 has amounted to S$5.49m (or S$0.681c per Unit). Port Logistics had done well in 1Q21, with revenue increasing 40.4% YoY to S$12.7m, and NPI increasing 41.8% YoY to S$11.9m (NPI margin +0.9pp. YoY to 93.5%). E-commerce Logistics has also recorded a strong 1Q21 growth, with revenue and NPI rising 32.4% and 30.9% YoY to S$14.7m and S$12.7m, respectively (NPI margin -1.0% to 86.5%). On the other hand, Specialised Logistics was muted in 1Q21, with Revenue and NPI flattish YoY at S$3.4m and S$3.1m, respectively (NPI margin +0.7pp. to 90.7%). While insurance claims could offset the revenue loss and restoration costs somewhat, we are cognizant that Chongxian Port Investment contributed to ~27% and ~28% of FY20 Revenue and NPI, respectively. We are currently reviewing our recommendations for ECWREIT.

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached) ECWREITSASSRBHGREITPeriod1Q211Q211Q21Gross Revenue (S$ m)30.8 (+30.9% YoY)EMA Rental Income: 34.1 (+23.4% YoY)Not DisclosedNPI (S$ m)27.7 (+30.9% YoY)EMA Rental Income (Excluding straight-line adjustments): 32.3 (+27.8% YoY)Not DisclosedDPU (S$ c)1.531.759 (+31.9% YoY)Not DisclosedNAV per Unit (S$)0.910.922Not DisclosedP/B (x)0.811.000.64(Based on 4Q20 NAV)Occupancy (%) 99.193.592.1Reversion (%) NANot DisclosedNot DisclosedGearing (%)38.327.635.6Cost of Debt (%)4.13.33.81 Yr Fwd Yield (%)7.767.46NADebt Hedged (%)100% of offshore facilitiesNot Disclosed60% of offshore loansTarget PriceUnder ReviewNANARatingUnder ReviewNANAEC World Reit (ECWREIT SP) 1Q21 DPU +32.3% YoY; Robust growth but DI retention persist with retained DI snowballing to S$5.49mBoth revenue and NPI grew by 30.9% YoY in 1Q21 to S$30.8m (26.9% BB est.) and S$27.7m (28.1% BB est.), respectively, mainly due to absence of rental rebates in 1Q20 and strengthening of RMB. In RMB terms, gross revenue and NPI were 26.0% and 26.1% YoY higher, respectively1Q21 DPU increased 32.3% YoY or 7.4% QoQ to S$1.532c (26.9% BB est.), mainly due to absence of rental rebates given. ECWREIT continued to retain 10% of DI in 1Q21 (vs. 10% in 4Q20 and 5% in 1Q20) on a conservative view of uncertainties arising from prolonged COVID-19 pandemic globally and for general working capital purposeECWREIT has secured renewal of major lease at Hengde Logistics, extending WALE to 3.2 years (by GRI) from 3.1 years as at 31Mar21. ~11.8% of GRI will be due for renewal for the remaining of FY21EPortfolio occupancy remains robust at 99.1% (vs. 99.3% in 4Q20 and 96.7% in 3Q20)On 30Apr, ECWREIT announced an incident of a displacement and collapse of a berth at Chongxian Port Investment that resulted in the damage of two gantry cranes located within the vicinity of the berth. Due to the location of the damaged area, the operations at the damaged berth and the 2 adjacent berths have been suspended. The rest of the port operation is not affected. The cause of the incident is still being investigated. ECWREIT is working closely with the insurer to assess the quantum of revenue loss and property damage recoverable by insurance claimsPortfolio gearing stands at 38.3% (vs. 38.1% in 4Q20 and 38.6% in 1Q20) with average cost of debt of 4.1% pa. (vs. 4.2% in 4Q20 and 4.3% in 1Q20) and 100% of offshore facilities hedgedECWREIT currently trades at 7.76% FY21E yield and 0.81x P/B.Comments: 1Q21 revenue and NPI came in at 26.5% and 26.0% of our full-year FY21E estimates, respectively. Meanwhile, 1Q21 DPU came in at 27.5% of FY21E estimates. Note that we have assumed a 10% DI retention for FY21E, the higher than expected 1Q21 DPU was due to a lower 1Q21 tax rate at 24.7% (vs. our projected 38.0%). Including 1Q21’s S$1.38m, total retained DI since 1Q20 has amounted to S$5.49m (or S$0.681c per Unit). Port Logistics had done well in 1Q21, with revenue increasing 40.4% YoY to S$12.7m, and NPI increasing 41.8% YoY to S$11.9m (NPI margin +0.9pp. YoY to 93.5%). E-commerce Logistics has also recorded a strong 1Q21 growth, with revenue and NPI rising 32.4% and 30.9% YoY to S$14.7m and S$12.7m, respectively (NPI margin -1.0% to 86.5%). On the other hand, Specialised Logistics was muted in 1Q21, with Revenue and NPI flattish YoY at S$3.4m and S$3.1m, respectively (NPI margin +0.7pp. to 90.7%). While insurance claims could offset the revenue loss and restoration costs somewhat, we are cognizant that Chongxian Port Investment contributed to ~27% and ~28% of FY20 Revenue and NPI, respectively. We are currently reviewing our recommendations for ECWREIT.

ASEAN Builder's Scoop (12May21) - ECWREIT strong growth despite retention

Singapore

CapitaLand Limited is a real estate company focused on investment holding. The Company and its subsidiaries are principally engaged in investment holding, real estate development, investment in real estate financial products and real estate assets, investment advisory and management services, as well as the management of serviced residences.

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Capitaland (CAPL SP)

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ASEAN Builder's Scoop (12May21) - ECWREIT strong growth despite retention

ECWREIT strong growth despite retention; SASSR rebounded from a low-base; CAPL fund mgmt, resi the bright spots; FPL SG & AUS supporting growth;...

SCCM Asia Research

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