Posts: 111
Threads: 1
Joined: Feb 2013
Reputation:
7
16-11-2013, 01:11 PM
(This post was last modified: 16-11-2013, 01:15 PM by FatBoi.)
Quite a bit of tenant concentration risk at 76%, don't you think so? Especially when Leighton Group is not exactly flying and having corruption allegations on their back.
http://mobile.abc.net.au/news/2013-10-07...n=business
A stock well bought is half sold - Ben Graham
Price is the most important factor to use in relation to value - Walter Schloss
Posts: 111
Threads: 1
Joined: Feb 2013
Reputation:
7
(16-11-2013, 01:32 PM)NTL Wrote: (16-11-2013, 01:11 PM)FatBoi Wrote: Quite a bit of tenant concentration risk at 76%, don't you think so? Especially when Leighton Group is not exactly flying and having corruption allegations on their back.
http://mobile.abc.net.au/news/2013-10-07...n=business
Are they the same Leighton who work on our MRT projects?
http://ride.asiaone.com/news/general/sto...omson-line
Interestingly, both JV partners Leighton Contractors (Asia) & John Holland sit under same the Leighton Holdings umbrella.
http://www.leightonproperties.com.au/abo...group.html
A stock well bought is half sold - Ben Graham
Price is the most important factor to use in relation to value - Walter Schloss
Posts: 1,039
Threads: 14
Joined: Dec 2012
I think monday markets will likely to react negatively, maybe will
Drop 1-5% more. Buy on dip? Or just avoid?
Posts: 66
Threads: 4
Joined: Dec 2010
Reputation:
3
It is surprising that Suntec did not manage to negotiate a coupon equal to the property yield. So the coupon payments of 6.32% over the development period being less than the property yield will be a drag on the target IRR of the project. The traditional Sydney CBD where banks, insurers locate is on the other side of the Harbor Bridge. So, the cap rate itself appears to be expensive for a North Sydney / metropolitan Sydney project.
I wonder if the structure employed allows Suntec to classify this outside the 10% development cap for S-REITs. Finally, the % of SGD and AUD debt employed by Suntec REIT to finance this acquisition would be interesting. Would they be borrowing in SGD to make this transaction more accretive?
Posts: 1,045
Threads: 5
Joined: Nov 2012
Reputation:
6
I don't see much negative in this news, except the it is fund by debt, and the debt ratio raised above 40%. The DPU likely will go up a bit, and if there is a private placement, the dilution should not be too much.
The loan of $500M is for the land acqusition and development cost. The building after completed should worth more than that? Say, another 10% more, based on "profit margin" of developers?
There should be opportunity to buy right after the private placement is announced.
Posts: 66
Threads: 4
Joined: Dec 2010
Reputation:
3
NTL - Believe the contract is a fixed price contract; ie, Suntec will not enjoy the development margin. It goes to Leightons who take on the delivery risk. So whether the building is worth more or less at completion depends on market conditions; whether Suntec bought it at an appropriate price.
Posts: 1,045
Threads: 5
Joined: Nov 2012
Reputation:
6
Ah... Ok. So it is like they are buying a building. And at the moment, even while the building is under construction, they are collecting an effective "rental" of 6.32% of the "property value".
Will the rental when the building is ready be above the "6.32%"? If it does, guess it will not be so bad. Afterall, Suntec cap rate is around 4%? What would be the cap rate for Australian property?
Posts: 25
Threads: 0
Joined: Nov 2012
Reputation:
0
I don't get it, getting a coupon of 6.32% p.a while the building is under construction. It's the first time I encounter such thing. Is it common in Australia or just this project? The coupon is to entice buyers?
Can anyone explain this to me?
Homepage
PR Newswire
