Dynasty REIT

http://masnet.mas.gov.sg/opera/sdrprosp....30034C71E/$File/Dynasty%20REIT%20Preliminary%20Prospectus%20%2810%20Oct%202012%29.pdf [Preliminary Prospectus]

Interesting to note that the Sponsor has waived distributions till 2017.

(11-10-2012, 01:12 PM)Nick Wrote: http://masnet.mas.gov.sg/opera/sdrprosp....30034C71E/$File/Dynasty%20REIT%20Preliminary%20Prospectus%20%2810%20Oct%202012%29.pdf [Preliminary Prospectus]

Interesting to note that the Sponsor has waived distributions till 2017.

Even more interesting is the DPU support and it's impact on Yield (pg 37-38). Extracts,

In the absence of DPU Support, the DPU and the distribution yield would be RMB[0.0699] and RMB[0.0662] and [3.6]% (annualised) and [3.6]% (annualised) for the Forecast Period 2012 based on the Maximum Offering Price and Minimum Offering Price, respectively, and RMB[0.2092] and RMB[0.2009] and [4.5]% and [4.6]% for the Projection Year 2013 based on the Maximum Offering Price and Minimum Offering Price, respectively. (See “Distributions — Waiver of Entitlement to the Relevant Sponsor Distribution” for further details.)

In the absence of DPU Support and the Waived Distribution, the DPU and the distribution yield would be RMB0.0633 and RMB0.0596 and 3.2% (annualised) and 3.2% (annualised) for the Forecast Period 2012 based on the Maximum Offering Price and Minimum Offering Price, respectively, and RMB0.1934 and RMB0.1844 and 4.1% and 4.2% for the Projection Year 2013 based on the Maximum Offering Price and Minimum Offering Price, respectively.

(11-10-2012, 02:56 PM)KopiKat Wrote:

(11-10-2012, 01:12 PM)Nick Wrote: http://masnet.mas.gov.sg/opera/sdrprosp....30034C71E/$File/Dynasty%20REIT%20Preliminary%20Prospectus%20%2810%20Oct%202012%29.pdf [Preliminary Prospectus]

Interesting to note that the Sponsor has waived distributions till 2017.

Even more interesting is the DPU support and it's impact on Yield (pg 37-38). Extracts,

In the absence of DPU Support, the DPU and the distribution yield would be RMB[0.0699] and RMB[0.0662] and [3.6]% (annualised) and [3.6]% (annualised) for the Forecast Period 2012 based on the Maximum Offering Price and Minimum Offering Price, respectively, and RMB[0.2092] and RMB[0.2009] and [4.5]% and [4.6]% for the Projection Year 2013 based on the Maximum Offering Price and Minimum Offering Price, respectively. (See “Distributions — Waiver of Entitlement to the Relevant Sponsor Distribution” for further details.)

In the absence of DPU Support and the Waived Distribution, the DPU and the distribution yield would be RMB0.0633 and RMB0.0596 and 3.2% (annualised) and 3.2% (annualised) for the Forecast Period 2012 based on the Maximum Offering Price and Minimum Offering Price, respectively, and RMB0.1934 and RMB0.1844 and 4.1% and 4.2% for the Projection Year 2013 based on the Maximum Offering Price and Minimum Offering Price, respectively.

and to add on

"The Manager has put in place the DPU Support of RMB491.0 million as while the Properties are in operation as of the Latest Practicable Date, the Properties have yet to achieve stabilised occupancy and optimal rental rates. Up to RMB491.0 million of the proceeds raised from the Offering will form the DPU Support, from which the Manager will utilise for the primary purpose of payment of distributions, which will be treated as a return of capital to Unitholders.

The amount under the DPU Support is based on, inter alia, a threshold net property income yield of 5.8%1 for the IPO Portfolio (the “Threshold NPI Yield”). (See “Distributions – DPU Support Arrangement” for further details.) The Manager intends to utilise RMB73.1 million and RMB137.5 million of the DPU Support for the Forecast Period 2012 and the Projection Year 2013 respectively."

The DPU support forms 10% of the gross proceed of ~5000m RMB.

You give them money so that they give you money out of your money? Interesting, though this does not exactly means the reit is not investable

IIRC, the prospectus mentioned that the market rent is 20 - 25% above the current rent of the portfolio, therefore, DPU support is initiated.

As the waiver for sponsor units, I can't understand why. maybe just otherwise, the yield would be too low to be attractive?

Last year, ARA was involved in the listing on the HK exchange of the first LKS-linked offshore China reit denominated in yuan - hui xian reit ( http://www.huixianreit.com/eng/ ). Dynasty reit is their 2nd one of this genre but slated for SGX now.

Performance since IPO of hui xian reit - line in red:

[Image: z?s=%5eHSI&t=2y&q=l&l=off&z=l&c=%5ESTI,8...&region=US]

Might as well buy Treasury China trust instead of Dynasty REIT.

May I know why is China Treasury Trust a better buy than Dynasty Reits?

As for the DPU support and waiver, is it a fair deal? The IPO would raise ~RMB 5b to 5.4b, of which RMB 491m ~10% will be used in this support scheme. It mentions that the 3 properties rental has not yet stabilized and their current rent is ~20% below market rate. 34% of it is due for lease renewal which is good news. I am kind of dumbwit, how does this support scheme compare with one w/o support scheme? Sponsor is forgoing his DPU so .......??

Last year Hui Xian Reit still below IPO but its IPO yield is at ~4% and now should be higher would a lower reit unit price. Would you say its unit price weakness is due to its low IPO yield?

Thanks

(14-10-2012, 11:10 PM)BeDisciplined Wrote: May I know why is China Treasury Trust a better buy than Dynasty Reits?

As for the DPU support and waiver, is it a fair deal? The IPO would raise ~RMB 5b to 5.4b, of which RMB 491m ~10% will be used in this support scheme. It mentions that the 3 properties rental has not yet stabilized and their current rent is ~20% below market rate. 34% of it is due for lease renewal which is good news. I am kind of dumbwit, how does this support scheme compare with one w/o support scheme? Sponsor is forgoing his DPU so .......??

Last year Hui Xian Reit still below IPO but its IPO yield is at ~4% and now should be higher would a lower reit unit price. Would you say its unit price weakness is due to its low IPO yield?

Thanks

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Any advice or comments from the wise ones?

TCT is trading at a 60% discount to its NAV. Dynasty REIT will not be sold at a discount to NAV. TCT seems like a better deal to me although there are risks in it.

I agree with what Lim & Tan says,

Dynasty Reit: IPO at S$0.86 – 0.92 / Rmb4.40 – 4.70

- Strictly based on yield alone, it seems clear investors should stick to the well-tested CRCT (part of the CapitaLand Group) than subscribe for Dynasty, the new offering from ARA / Li Ka Shing.

- CRCT has declared 2.42 cents for Q3 ended Sept ’12 or 9.63 cents annualized. That’s 5.9% yield, which is in line with Hui Xian‘s, ARA / LKS’ first yuan denominated reit listed in HK, which is still some 20% off its IPO price.

- Dynasty is tempting investors with an indicative yield of 6.8-7.1% for 2012 and 7.0-7.3% for 2013.

- But that is because of the rental support which will come from the IPO proceeds (ie getting partly paid with your own money)!

- Without this, yield would have been 3.2 % and 4.2% respectively.

- Indeed, as advised by ARA’s John Lim, and quoted in Edge ‘s latest issue, Dynasty “will do very well in the mid to long term“, ie it is best suited for investors sitting on surplus Rmb deposits.