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28-03-2013, 07:54 AM
The Straits Times
www.straitstimes.com
Published on Mar 28, 2013
First Reit to buy 2 Indonesia hospitals
By Dennis Chan Deputy Money Editor
HEALTH-CARE based First Real Estate Investment Trust (Reit) has agreed to acquire two new income-producing hospitals in Indonesia for $190.4 million in total.
First Reit will buy Siloam Hospitals Bali in the resort island city of Kuta for $97.3 million.
It will also acquire Siloam Hospitals TB Simatupang in South Jakarta for $93.1 million.
Both properties belong to subsidiaries of Lippo Karawaci, the sponsor of First Reit.
The Kuta property will be financed entirely by a drawdown of committed debt facility while the Jakarta hospital will be financed by a combination of the debt facility and issuance of new units.
The issue price of units will be determined based on the 10-day volume-weighted average price of the units immediately preceding the date of completion of the deal.
Based on the average of two independent valuations, the Bali and Jakarta hospitals are being acquired at a discount of 13.3 per cent and 12.5 per cent to their respective valuations.
These acquisitions will further expand First Reit's portfolio to 14 properties across Indonesia, Singapore and South Korea, as well as expand its total asset size from $796.7 million as at Dec 31 to over $1 billion.
Lippo Karawaci, as master lessee of the two properties, has signed conditional master lease agreements for terms of 15 years, with an option to renew for a further 15 years.
This will help to provide stability to First Reit's gross rental income over the next 15 to 30 years.
The step-up feature of the base and variable rental components under both master leases would also provide locked-in organic growth in cash flow.
Based on annual initial rents of $9.7 million for the Bali hospital and $9.3 million for the Jakarta hospital, the properties will offer an initial net property yield in excess of 9 per cent.
These will boost net property income by $18.8 million and distribution per unit by 5.5 per cent to 6.94 cents for the year to Dec 31, assuming the properties were acquired on Jan 1 last year.
The equivalent net asset value per unit would have increased by 8.4 per cent to 90 cents.
The two hospitals are equipped with state-of-the-art facilities and specialised competencies in trauma and cardiology, and are strategically located and well- positioned to cater to middle- to upper middle-income people.
"The operator of the properties will also enjoy greater operating synergies in the long term which would indirectly benefit First Reit through higher variable rent and potential capital appreciation," said Dr Ronnie Tan, chief executive of Bowsprit Capital, which manages First Reit.
"Moving forward, we are committed to looking for yield-accretive assets in Asia to expand our portfolio size, to increase First Reit's diversity of income streams and ultimately, to achieve stable increasing returns to unit holders," he said.
Dr Tan also disclosed that the manager is considering obtaining a rating for the trust as part of its overall capital management strategy.
First Reit's unit rose 2.9 per cent to $1.23 yesterday.
dennis@sph.com.sg
www.straitstimes.com
Published on Mar 28, 2013
First Reit to buy 2 Indonesia hospitals
By Dennis Chan Deputy Money Editor
HEALTH-CARE based First Real Estate Investment Trust (Reit) has agreed to acquire two new income-producing hospitals in Indonesia for $190.4 million in total.
First Reit will buy Siloam Hospitals Bali in the resort island city of Kuta for $97.3 million.
It will also acquire Siloam Hospitals TB Simatupang in South Jakarta for $93.1 million.
Both properties belong to subsidiaries of Lippo Karawaci, the sponsor of First Reit.
The Kuta property will be financed entirely by a drawdown of committed debt facility while the Jakarta hospital will be financed by a combination of the debt facility and issuance of new units.
The issue price of units will be determined based on the 10-day volume-weighted average price of the units immediately preceding the date of completion of the deal.
Based on the average of two independent valuations, the Bali and Jakarta hospitals are being acquired at a discount of 13.3 per cent and 12.5 per cent to their respective valuations.
These acquisitions will further expand First Reit's portfolio to 14 properties across Indonesia, Singapore and South Korea, as well as expand its total asset size from $796.7 million as at Dec 31 to over $1 billion.
Lippo Karawaci, as master lessee of the two properties, has signed conditional master lease agreements for terms of 15 years, with an option to renew for a further 15 years.
This will help to provide stability to First Reit's gross rental income over the next 15 to 30 years.
The step-up feature of the base and variable rental components under both master leases would also provide locked-in organic growth in cash flow.
Based on annual initial rents of $9.7 million for the Bali hospital and $9.3 million for the Jakarta hospital, the properties will offer an initial net property yield in excess of 9 per cent.
These will boost net property income by $18.8 million and distribution per unit by 5.5 per cent to 6.94 cents for the year to Dec 31, assuming the properties were acquired on Jan 1 last year.
The equivalent net asset value per unit would have increased by 8.4 per cent to 90 cents.
The two hospitals are equipped with state-of-the-art facilities and specialised competencies in trauma and cardiology, and are strategically located and well- positioned to cater to middle- to upper middle-income people.
"The operator of the properties will also enjoy greater operating synergies in the long term which would indirectly benefit First Reit through higher variable rent and potential capital appreciation," said Dr Ronnie Tan, chief executive of Bowsprit Capital, which manages First Reit.
"Moving forward, we are committed to looking for yield-accretive assets in Asia to expand our portfolio size, to increase First Reit's diversity of income streams and ultimately, to achieve stable increasing returns to unit holders," he said.
Dr Tan also disclosed that the manager is considering obtaining a rating for the trust as part of its overall capital management strategy.
First Reit's unit rose 2.9 per cent to $1.23 yesterday.
dennis@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
