Suntec REIT

Thread Rating:
  • 1 Vote(s) - 5 Average
  • 1
  • 2
  • 3
  • 4
  • 5
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
Reply
(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
Reply
(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
Reply
I think monday markets will likely to react negatively, maybe will
Drop 1-5% more. Buy on dip? Or just avoid?
Reply
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?
Reply
(16-11-2013, 11:42 PM)felixleong Wrote: I think monday markets will likely to react negatively, maybe will
Drop 1-5% more. Buy on dip? Or just avoid?

It seems the Market already knows about this (deal) considering amount of sell down for past week. It may go lower but any larger dip could be opportunity.

Just my Diary
corylogics.blogspot.com/


Reply
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.
Reply
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.
Reply
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?
Reply
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?
Reply


Forum Jump:


Users browsing this thread: 2 Guest(s)