OUE H-Trust

[wee]

I'm trying to figure out what is the incentive for structuring a stapled offering.

If OUE HT does a rights offering, does it mean half the money will go to the BT?

"OUE H-REIT cannot issue (including the issue of partly paid units), transfer, register the transfer, consolidate or divide, redeem or buy back or cancel any of its units, unless the same action occurs in respect of OUE H-BT, and vice versa" -pg 230 of prospectus

Specuvestor,

I'm not very familiar with REITs, but my understanding is stapled BT + reits allows flexibility in terms of what the stapled security can do. REITs will enjoy corporate tax exemption but there are various conditions to be met. Hence for if the stapled security wants to venture, for eg, into overseas assets (which doesn't pay Singapore corporate tax anyway) investing via BT gives the manager added flexibility. They can decide to payout lesser profits from the overseas assets without affecting the REIT's tax status. Similarly the manager can use the BT for other things like development (again, more flexibility without affecting the REIT's tax status).

Please feel free to correct me if I'm off target here

[greengiraffe]

Very convincing debut performance indeed...

Better run for life or will slow bleed to death...

[DP28]

Good luck to those who vested!

[specuvestor]

I'm trying to figure out what is the incentive for structuring a stapled offering.

If OUE HT does a rights offering, does it mean half the money will go to the BT?

"OUE H-REIT cannot issue (including the issue of partly paid units), transfer, register the transfer, consolidate or divide, redeem or buy back or cancel any of its units, unless the same action occurs in respect of OUE H-BT, and vice versa" -pg 230 of prospectus

Specuvestor,

I'm not very familiar with REITs, but my understanding is stapled BT + reits allows flexibility in terms of what the stapled security can do. REITs will enjoy corporate tax exemption but there are various conditions to be met. Hence for if the stapled security wants to venture, for eg, into overseas assets (which doesn't pay Singapore corporate tax anyway) investing via BT gives the manager added flexibility. They can decide to payout lesser profits from the overseas assets without affecting the REIT's tax status. Similarly the manager can use the BT for other things like development (again, more flexibility without affecting the REIT's tax status).

Please feel free to correct me if I'm off target here

Hi Wee

On the same page it talks about the purpose of the BT which is 1) a last resort master lessee (which sounds like a scheme to bypass some kind of REIT restriction of not renting out to itself), or 2) project development and asset acquisition which I assume are other non REIT businesses

I am very keen to know what happens during a rights issue, which REITS often do: anyone knows if the proceed gets split between the REIT and BT since they have to issue shares at the same time?

[KopiKat]

Looking at the huge Buy Q (17Mil+) @ $0.88, most likely, the Stabilising Mgr in action. They have 68,182,000 ammo... Let's see if it lasts...

[DP28]

Thats abit too early for Goldman to make a move actually. I think they may let it dip before coming in..

All the shrewd Goldman folks, they will never make a loss deal.

[KopiKat]

For the record,

Open : $0.885
Close : $0.88
Range : $0.875 to $0.89
Vol : 80,500,000

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Looking at the huge Buy Q (17Mil+) @ $0.88, most likely, the Stabilising Mgr in action. They have 68,182,000 ammo... Let's see if it lasts...

Stabilising : 8,882,000 @ $0.88

Thats abit too early for Goldman to make a move actually. I think they may let it dip before coming in..

All the shrewd Goldman folks, they will never make a loss deal.

Not sure if they'll make a loss if they buy at IPO Price, perhaps some transaction costs? But, yes, they have more to gain in monetary terms, if they buy at below IPO price due to the 'Over-Allotment Option' they have been given. But, perhaps, it may not be good for their reputation if they allow an IPO to fall too much below IPO price? They'd appear to have "failed" in the role as Stabilising Mgr??

[greengiraffe]

http://infopub.sgx.com/FileOpen/STABILIS...eID=249290

wahaha... GS also looking to huat -stablised with 8882k purchased at $0.88

[lonewolf]

If OUE HT does a rights offering, does it mean half the money will go to the BT?

"OUE H-REIT cannot issue (including the issue of partly paid units), transfer, register the transfer, consolidate or divide, redeem or buy back or cancel any of its units, unless the same action occurs in respect of OUE H-BT, and vice versa" -pg 230 of prospectus

I dun think that would be the case when the BT is dormant. If I understand the above quoted paragraph correctly, I think it means the trust manager cannot just increase the no of units in the REITs without a corresponding increase in the units in the BT.

CDL H-trust carried out a PO in 2007. And I believed it carry out a number of placement exercise. New stapled units are created in each case. Each stable unit comprise a REIT + BT. All the money raised was for the REIT and not the BT.

I think you are on the verge of over-analysing stapled units a little too much. I agree that its interesting but in the case of OUE HT, FEHT and CDL HT, just remember that the BT component is non-active.

A-HT has an active BT; so you may want to take a look at their recent placement and see how the money is allocated. I did not look at the specifics but I believe the asset acquired goes into the REIT. So I would assume that the money raised is also for the REITs.

I believe there is no requirement that money raised through EFR must be equally split between the REIT and the BT. But I could be wrong of cos.

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Just like what I had done for APPT, I will be keeping track of the stabilising action for OUE H-Trust.

Stabilisating Action Day 1 (Jun 25)

8,882,00 units purchased at $0.88

Stabilisating Action Day 10 (12 Aug)

5,000,000 units purchased at $0.88

Total units purchased to date: 13,882,000
Total stabilising units left: 54,238,000

Plenty of bullets left as long as the market dun tanked towards the end of the month.

[specuvestor]

Hi Lonewolf

I know that BT is not active. But this is a structured product so we need to understand the mechanics properly. Thanks for guiding me to A-HT

My basis is very simple: if Lonewolf you are the owner, what is the incentive for you to go into a complex structure like this instead of a simple REIT?

For one I can think of using funds allocated to the BT during capital calls to pay for the master lease as a "short term bridging" so that the REIT yield does not drop ON PAPER. That of course means little to those who analyse the cashflow properly. Or when the owners deemed right, to venture into other non REIT related business.

I'm trying to figure out what is the incentive. After a while we can see the difference between listed business trust and REIT in Singapore, when people thought they were not so dissimilar prior to 2009.