Analysing REITS

[cfa]

Hi KopiKat,

I Thought it should be base on weighted average interest rate per annum , not Nominal interest rate ? May be I was incorrect . Hope you can recheck and advise, thanks.

(Vested)

I believe the 3.16% figure given in AR2012 would have also included the higher interest rate loans for A$ (5.52% to 6.88%) & RM (5.35%). The current refinancing is meant for the JPY and some of the SGD borrowings which were at lower interest rates.

So, I don't think we can draw any conclusion by comparing using the 2.4% (refinancing of JPY & some SGD) vs 3.61% (AR2012 - Weighted Average).

Further, these new loans are 'unsecured' and is it possible that the interest rate would be lower than the previous ones which were 'secured' against their Ngee Ann City property?

I think you have a good point and got it right, thanks.

[Dividend Warrior]

There is an article in business times newspaper today that says REITs are using more MTNs for financing.

Is it a good thing?

[FatBoi]

Is it a good thing for...

The issuer?
It adds flexibility in financing, since MTNs is an alternative to corp bond issuance, rights issues, bank borrowings. MTN buyers usually institutions & HNW individuals I believe.

The unit holders?
Depends, on one hand, it signals having another layer of protection before REITs resort to rights issues to secure funding. It may also give u comfort the REIT can fund any growth plans without u putting in more $$. But u will also be wary if gearing has now the potential to get out of hand. MTNs are unsecured I believe.

[Greenrookie]

I thought MTN can be secured or unsecured, and the terms subject to "willing buyer, willing seller" basis?

Is it not just like a ready credit line to be drawn down, just that now you have a "identified" underwriter and sum?

Anyone can enlighten me?

[cfa]

There is an article in business times newspaper today that says REITs are using more MTNs for financing.

Is it a good thing?

Could you copy and paste it here to share, thanks.

[Dividend Warrior]

There is an article in business times newspaper today that says REITs are using more MTNs for financing.

Is it a good thing?

Could you copy and paste it here to share, thanks.

Sorry. I read it from a hardcopy in my office.

(Vested in SPH )

---

I thought MTN can be secured or unsecured, and the terms subject to "willing buyer, willing seller" basis?

Is it not just like a ready credit line to be drawn down, just that now you have a "identified" underwriter and sum?

Anyone can enlighten me?

I think the MTNs are usually unsecured bcos this is a way for the REITs to unencumbered their assets.

Is this good for the REITs?

[soros]

Not sure this table helps in this context. Why are we measuring REITs by capital gains ? People who invest in Reits go for yields. We can try to time our entry but if you are out for a period of time such as cash, the time for waiting is your yield loss too.

Furthermore for Fed to taper, the economy has to be much stronger which may also mean better rental price to keep a closer pace with rates up.

I notice the share prices for Reits listed in Hong Kong have also fallen by 15-20% since May which suggest the fund managers are responding to the early termination of QE3 and possible rise in bank interest rates.

[FatBoi]

I believe this is the article that DW first brought up. Enjoy~


S-Reits banking more on MTNs for financing
Oxley Holdings is latest with $135m fixed-rate notes maturing in 2015
By Mindy Tan tanmindy@sph.com.sg

S-REITS have become less reliant on traditional senior loans secured against specific assets, and are taking to using Medium-Term Note (MTN) issuances as an alternative source for the financing of their real estate portfolios.

Indeed, there has been a significant rise in MTN issuances in the past five years.

Jones Lang LaSalle's (JLL) Asia Capital Markets research team has said that MTNs in issue grew at a compounded annual growth rate of 38 per cent between 2008 and 2012. These issued bonds, often guaranteed by the S-Reit's Trustee rather than secured against a specific asset or portfolio of assets, now represent about 30 per cent of total borrowing among S-Reits which issue MTNs.

To date, approximately half the Reits listed on Singapore Exchange have MTN facilities in place; they include CapitaMall Trust, Ascendas Reit, Frasers Centrepoint Trust and Cambridge Industrial Trust, said the consultancy.

Yesterday, Oxley Holdings announced that it had issued $135 million in fixed-rate notes due in 2015 under its $500 million multi-currency MTN programme.

The Series 3 Notes will bear interest at the fixed rate of 4.75 per cent per annum, and mature on Sept 23, 2015.

The net proceeds will be used for general corporate purposes, including the refinancing of existing borrowings and the financing of working capital and capital-expenditure requirements.

MTNs are increasingly popular partly because they can be offered under varying structures, such as multi-currency, maturity, fixed/floating coupon and listing/unlisted for each tranche issued.

Another trend of note is that although MTN issuances have been steadily increasing, the gearing of most S-Reits has remained relatively stable.

Indeed, the higher proportion of unsecured MTNs of total debt, coupled with a prudent leverage ratio, have helped support a higher unencumbered-asset ratio for their portfolios, which makes for favourable credit ratings.

In addition, MTNs are an alternative source of debt that managers have at their disposal, and a disciplined approach to growing Reits' asset base, said JLL.

Bastian van Halder, the associate director of JLL's corporate finance team, said: "The popularity of MTNs as an alternative source of finance for S-Reits would probably continue in the medium term, given their current strategy to increase assets under management while adopting a more flexible debt management strategy."

Specifically, S-Reits are likely to continue to issue debt within the two-year to five-year maturity range, said JLL.

This is because the spread between 10-year Singapore Government Securities (SGS) bonds and five-year SGS bonds widened to 134 basis points in Q2, from 100 basis points as at the end of Q1 this year, marking the largest quarter-on-quarter spike since 2009.

By issuing debts around the two-year to five-year maturity range, S-Reits will be better able to manage the portfolio's weighted average cost of debt and targeted weighted average debt expiry profile, said JLL.

To this end, MTN programmes and their subsequent series of unsecured notes issuances are likely to continue to be used by managers to finance acquisitions or to refinance maturing debt, added the consultancy.

Source: Business Times

[Dividend Warrior]

I believe this is the article that DW first brought up. Enjoy~


S-Reits banking more on MTNs for financing
Oxley Holdings is latest with $135m fixed-rate notes maturing in 2015
By Mindy Tan tanmindy@sph.com.sg

S-REITS have become less reliant on traditional senior loans secured against specific assets, and are taking to using Medium-Term Note (MTN) issuances as an alternative source for the financing of their real estate portfolios.

Indeed, there has been a significant rise in MTN issuances in the past five years.

Jones Lang LaSalle's (JLL) Asia Capital Markets research team has said that MTNs in issue grew at a compounded annual growth rate of 38 per cent between 2008 and 2012. These issued bonds, often guaranteed by the S-Reit's Trustee rather than secured against a specific asset or portfolio of assets, now represent about 30 per cent of total borrowing among S-Reits which issue MTNs.

To date, approximately half the Reits listed on Singapore Exchange have MTN facilities in place; they include CapitaMall Trust, Ascendas Reit, Frasers Centrepoint Trust and Cambridge Industrial Trust, said the consultancy.

Yesterday, Oxley Holdings announced that it had issued $135 million in fixed-rate notes due in 2015 under its $500 million multi-currency MTN programme.

The Series 3 Notes will bear interest at the fixed rate of 4.75 per cent per annum, and mature on Sept 23, 2015.

The net proceeds will be used for general corporate purposes, including the refinancing of existing borrowings and the financing of working capital and capital-expenditure requirements.

MTNs are increasingly popular partly because they can be offered under varying structures, such as multi-currency, maturity, fixed/floating coupon and listing/unlisted for each tranche issued.

Another trend of note is that although MTN issuances have been steadily increasing, the gearing of most S-Reits has remained relatively stable.

Indeed, the higher proportion of unsecured MTNs of total debt, coupled with a prudent leverage ratio, have helped support a higher unencumbered-asset ratio for their portfolios, which makes for favourable credit ratings.

In addition, MTNs are an alternative source of debt that managers have at their disposal, and a disciplined approach to growing Reits' asset base, said JLL.

Bastian van Halder, the associate director of JLL's corporate finance team, said: "The popularity of MTNs as an alternative source of finance for S-Reits would probably continue in the medium term, given their current strategy to increase assets under management while adopting a more flexible debt management strategy."

Specifically, S-Reits are likely to continue to issue debt within the two-year to five-year maturity range, said JLL.

This is because the spread between 10-year Singapore Government Securities (SGS) bonds and five-year SGS bonds widened to 134 basis points in Q2, from 100 basis points as at the end of Q1 this year, marking the largest quarter-on-quarter spike since 2009.

By issuing debts around the two-year to five-year maturity range, S-Reits will be better able to manage the portfolio's weighted average cost of debt and targeted weighted average debt expiry profile, said JLL.

To this end, MTN programmes and their subsequent series of unsecured notes issuances are likely to continue to be used by managers to finance acquisitions or to refinance maturing debt, added the consultancy.

Source: Business Times

Thanks!

Yes. This is the article.

[ywilson]

Does anyone one know who are the investors in SReits' MTN? And if these MTN are traded in secondary market?

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