Frasers Property (formerly: Frasers Cpt (FCL))

[greengiraffe]

On a macro basis, when global liquidity remains aplenty, it is difficult to come across sizable hard asst portfolio in a well regulated and transparent operating environment.

On a company level, Australand value is being endorsed by Stockland's pursuit. I am not saying Stockland has a good track record with their M&A pursuit historically. However, given that Australand's focus is their present forte, they should have a better feel of Australand's underlying value.

Given that Australand's exposure to commercial office assets in Australia is small (the most problematic sector), by default Australand is relatively clean. Moreover, with housing market "booming" on the eastern states (NSW, Vic), Australand has good success in their recent new launches and hence development profits may not have been adequately factored into the valuations. In addition, accumulating a sizable residential landbank Down Under over a diversified location and eventually bringing to market is a long process - can take at least 5 years for a starting launch to easily over 10 years for entire project to complete. I think this tedious process is not well appreciated by many to have a meaningful platform in Australia.

GG

We, who practicing value investing, are following closely a guideline of buying a dollar for 50 cents.

Will the guideline be any differently, if the dollar was sold for 30 cents recently? Well, it shouldn't make any difference, except reminding you to make sure the dollar worth really a dollar.

I am practicing the same for FCL's Australand acquisition. Instead of paying attention on why it was sold cheaper previously, I am trying to figure out why Australand worth the dollars paid.

(vested in FCL)

[greengiraffe]

http://www.smh.com.au/business/property/...zrxqh.html

Student housing recognised as one of best performing sectors during economic downturn
Date
June 6, 2014

Carolyn Cummins
Commercial Property Editor

The Frank Gehry-designed University of Technology, Sydney’s (UTS) Dr Chau Chak Wing Building is due to open and will be a landmark for the area that is fast becoming a hub for schooling and residential in high rise towers.

UTS Vice-Chancellor Professor Ross Milbourne said the new building will also be one of Sydney’s greenest education buildings, with the awarding of a 5 Star Green Star – Education Design v1 rating from the Green Building Council of Australia (GBCA).

The opening comes as student housing was recognised as one of the best performing sectors during the global economic downturn.

Near to the newly renovated building UTS has four residences providing furnished twin, studio and share apartment accommodation.

In Parramatta, the University of Western Sydney board of trustees on Wednesday agreed in principle recently to develop a multi-storey home, estimated to cost more than $120 million, in the ‘‘civic heart’’ of the area.

The new Central Park site at Broadway will also offer student housing.

Four development sites including the Parramatta Square precinct are believed to be under consideration by the university as it calls for expressions of interest for a joint venture development or a lease arrangement.

According to a new report from Savills, it is highly sought after by investors.

Purpose built student housing produces reliable rental income flows which, although derived from short tenancies, is secured by depth and stability of demand. Growing demand from internationally-mobile students, combined with low levels of competing supply in many world-leading university cities, is creating new opportunities for investment in premium purpose built accommodation.

The report says investment in the sector has risen rapidly post downturn, expanding from $3.4 billion globally in 2007 to a new high of $7.2 billion in 2013.

While institutional investors have dominated cross border investment to date, accounting for 57 per cent of deals by volume, Savills expects private wealth to come to the fore where student housing is still an emerging sector.

Stuart Cox, Savills Australia said, in Australia, Unilodge has dominated student accommodation since the early 90s with established student accommodation in Sydney, Melbourne, Brisbane and Canberra.

‘‘Today the market has expanded to include operators such as Iglu and Urbanest as they understand this asset class, although we are now gradually seeing the arrival of new investors, especially of Chinese origin, as it becomes more and more understood,’’ Mr Cox said.

“The appeal of this asset class as an alternative investment, is that behaves more like commercial property (yield driven) but with exposure to the residential housing market.’’

He said oversupply is a rare phenomenon in student housing as the increase in student numbers over the last 10 years has left most higher education establishments short of accommodation.

‘‘There has also been a significant drive by universities over the last 10 years to diversify their income sources resulting in rising international student numbers with the largest from China and India.

“With yields in the range of 6 to 7.5 per cent, student housing is certainly an asset class to look out for,’’ he said.

[greengiraffe]

One attraction of Australand - Industrial Property Development

http://www.theage.com.au/business/proper...39mgk.html

Industrial property development and sales activity are forecast to eclipse other sectors
Date
June 7, 2014

Carolyn Cummins
Commercial Property Editor

Industrial property development and sales activity are forecast to eclipse other sectors as demand is rising for logistic centres in a market of falling supply, according to the participants.

Goodman Group, Valad, DEXUS, Stockland, GPT and Australand, among others, have earmarked the sector for strong growth in the coming years.

Knight Frank's national director, industrial, Eugene Evgenikos, said the industrial market was boosted by strong inflows of capital with a broad range of investors seeking increased exposure to the sector. The considerable depth of buyers in the market would result in sales volumes remaining firm.

''The last 12 months has seen a substantial increase in industrial sales volumes with a broad range of investors actively looking for acquisition opportunities in the market,'' he said.

Goodman Group's chief executive, Greg Goodman, said the Australian market has been active in the past year with shortage of supply but high demand from overseas and local buyers.

Mr Goodman also launched this week the group's development of a new $US150 million logistics centre at Rancho Cucamonga in the Inland Empire West market of Southern California.

He said the new project signalled the launch of a 1.4 million square metre development pipeline in key US logistics markets, which will result in $US1.4 billion of development work in progress from Goodman Birtcher's operations over the next three years.

In Australia Mr Evgenikos said as developers look to facilitate tenant demand for specialised assets from companies addressing supply chain efficiencies, there was expected to be increasing competition for land opportunities.

Fund manager Aviva Investors has recently increased its Australian logistics portfolio by $29.25 million with the acquisition of two more industrial assets located in Sydney for the superannuation fund Prime Super.

Knight Frank's national director, head of research and consulting, Matt Whitby, said while continuation of the prime yield compression that began in 2012 was evident, a number of investors and developers were moving up the risk curve to acquire secondary assets with shorter lease profiles or land parcels for their development pipeline.

''Land sales over the past few years have been notably subdued. However, with developers' inventory levels becoming relatively depleted, the early stages of land value appreciation are emerging, in both the medium and larger-sized parcels.''

[ngcheeki]

http://www.theedgesingapore.com/the-dail...8-mil.html

Thai billionaire Charoen Sirivadhanabhakdi’s Singapore real estate company Frasers Centrepoint (FCL) could raise as much as US$358 million ($448 million) by listing a hospitality industry trust business in Singapore, two people with direct knowledge of the matter said.

The deal size is slightly below an earlier estimate of as much as US$480 million for the initial public offering, made before Frasers Hospitality Trust (FHT) began pre-marketing last week. The trust comprises six serviced residences controlled by FCL and six hotels such as Singapore’s InterContinental Hotel, owned by Charoen’s TCC group.

FCL indicated to investors the newly listed firm will have a market capitalisation of between $1.02 billion to $1.12 billion, one of the people told Reuters. The parent plans to sell 30% to 40% stake of FHT to investors, raising up to $448 million , both people said.

The people did not want to be identified because the details of the deal are not public.

The sale could be formally launched as early as next week, they said. A formal indicative range is yet to be disclosed, but one source said FHT could offer an indicative dividend yield of 6.5% to 7.5%.

A spokesman for FCL declined to comment.

The listing would mark the first step in merging the property assets of Charoen’s business empire, comprising Singapore-listed FCL and his Bangkok-based TCC Group, after the Thai tycoon won control of the drinks-and-property conglomerate Fraser and Neave in an US$11 billion deal last year.

Banks DBS, HSBC, Morgan Stanley, Standard Chartered and United Overseas Bank are advisers on the deal, the sources said.

[greengiraffe]

Hedge funds target Australand
BEN WILMOT THE AUSTRALIAN JUNE 10, 2014 12:00AM

AUSTRALAND Property Group’s receipt of a surprise all-cash takeover offer from Singapore-listed Frasers Centrepoint has prompted hedge funds to pour on to the target’s register and they now account for about 20 per cent of investors.

Their interest has been prompted by Australand striking an agreement with Frasers to negotiate a binding deal within four weeks and the promise of the target’s first-half distribution being paid by June 24.

JPMorgan analysts have called the Frasers move a potential knockout blow for rival bidder Stockland which, despite holding 19.9 per cent of Australand, is tipped to walk away.

While Frasers does not own any Australand shares, the hedge funds are likely to favour its bid, evening out any advantage in Stockland’s holding.

AMP Capital’s quantitative fund was among the sellers to hedge funds and listed REIT fund managers are now expected to follow suit and reinvest elsewhere in the sector.

On JPMorgan’s reckoning, Stockland may struggle to lift its offer or inject more cash and still put together a value-accretive deal.

[greengiraffe]

Australand staff back Frasers bid
Matthew Cranston
427 words
10 Jun 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.
Australand Property Group employees are breathing a sigh of relief at the increasing likelihood of a Frasers Centrepoint takeover with some having expected wholesale redundancies if Stockland's bid had been successful.

Numerous Australand staff indicated to The Australian Financial Review resounding support for Frasers' $2.6 billion takeover bid lobbed in last week rather than Stockland's second all-scrip bid. "With Stockland you are going to see overlap no matter what . . . but with Frasers, there is virtually no overlap with Australand and so there is no concern in that regard," one Australand employee said on the condition of anonymity. Another said the Stockland overlap would not be so prominent in medium density and commercial property space but would still lead to staff cuts. Stockland is expected to make a call this week as to whether it bids again or walks away from Australand with an $85 million profit.

Credit Suisse analyst John Richmond estimates Stockland would have made at least $30 million in medium-term cost savings if its bid was a success. This included a 66 per cent reduction in corporate overheads equating to about $20 million per year.

He said such savings as a $6 million annual reduction in residential division costs would be made through synergies in management, marketing, design and technology, while a $4 million annual reduction in investment property overheads would be made through synergies in management and technology.

Assumptions so far place Frasers' savings at $15 million, mostly through reduction in corporate overheads such as that achieved in delisting in Australand. In a statement by Frasers Centrepoint at the time of its bid, management reassured Australand staff that it was looking to keep the majority employed in order to build its Australian platform.

"Frasers Centrepoint has a very high regard for the Australand management team and intends to retain key management to ensure a smooth transition of ownership, and to provide certainty and stability to the business and Australand employees going forward." Key Australand executives including the managing director Bob Johnston have secured a new retention plan within a remuneration package opposed by some shareholders earlier this year. The Australand board said in April the new plan was decided upon due to "recent corporate activity".The plan included the ­provision of a retention payment for a small number of eligible executives, alongside other measures tied to short-term incentives and performance rights. A similar plan was introduced last year because the board considered it "essential to the stability of the group".


Fairfax Media Management Pty Limited

Document AFNR000020140609ea6a00026

[greengiraffe]

http://infopub.sgx.com/FileOpen/FCL_SGX_...eID=300771

CONDITIONAL CASH PROPOSAL TO ACQUIRE AUSTRALAND PROPERTY GROUP – WAIVER OF REQUIREMENT UNDER CHAPTER 10 OF THE LISTING MANUAL TO SUBJECT PROPOSED ACQUISITION TO SHAREHOLDERS' APPROVAL

In response to the application by FCL, the SGX-ST confirmed that it has no objection to FCL's proposal to ratify the Offer after the Offer has been made, subject to the following conditions:
(A) unanimous approval of the Directors on the Offer;
(B) submission of a written undertaking from FCL that it will seek FCL Shareholders' ratification of the Offer at an extraordinary general meeting to be convened by FCL (the "EGM");
© TCCA providing a written undertaking to FCL to vote in favour of approving the Offer by FCL at the EGM;
(D) TCCA providing a written undertaking to FCL that it will not dispose of its equity stake in FCL before and up to the date of the EGM; and
(E) FCL announcing via SGXNet:
(1) the grant of the Waiver (in compliance with Rule 107 of the Listing Manual), stating the reasons for FCL's application and the conditions attached to the Waiver, as required under Rule 107 of the Listing Manual;
(2) full details of the Offer, including information required under Rule 1010 of the Listing Manual; and
(3) unanimous approval of the Directors on the Offer.

[LLI]

More properties for the REITs in the pipeline now

[greengiraffe]

Indeed, FCL has been listed not for the sake of returning cash via asset light strategies and continued realisation of locked in pre-sales.

FCL's Australand intention appears to be a calculated move in view of the present liquidity flushed global environment where sizable quality assets are hard to come by. FCL would have easily headed to China where there are abundance of assets ups for grabs but they have deliberately steered clear due IMHO the high risks associated with lack of risk-adjusted adequate assets and perhaps a fluid regulatory environment.

FCL's UK experience would have pointed them there but again with the bubbly asset environment in UK, they are likely to face a hard time finding quality assets at prices that meet their expectations.

You are right that there are more assets that FCL can work on to add value before recycling to their REIT platform.

Vested
GG

More properties for the REITs in the pipeline now

[greengiraffe]

FCL, CLSA maintain BUY:

Frasers Centrepoint has made a $4.48/sh cash offer for Australand,
representing a 21.7% premium to ALZ’s NTA. The bid tops Stockland’s,
but we caution they may counter. FCL’s objective is to increase recurring
income to ~50% of earnings from 30-40% and we note the group’s
strong track record in Australia. Should the deal complete, gearing is
likely to rise to 80% and we caution investors on the possibility of an
equity raising. FCL is trading at a 43% discount to RNAV. Maintain Buy.
The deal
Frasers Centrepoint has made a $4.48 cash offer each Australand (ALZ AU -
A$4.55 - O-PF) shares (plus the 1H14 distribution), outbidding Stockland’s
(SGP AU - A$4.01 - O-PF) bid which equates to $4.43 per share with up to
12.4% in cash. FCL’s offer represents a 21.7% premium to ALZ’s NTA of
A$3.68 and Frasers has agreed to pursue this with a minimum acceptance of
50.1%. The current proposal is not yet a done deal as Stockland still may
counter bid.
No stranger to Australia
Frasers has a good track record in Australia with its recently-completed
Central Park development and Lumiere apartments in the Sydney CBD. FCL’s
objective is to increase its recurring income to ~50% of earnings from the
current of 30-40%. The commercial portfolio of ALZ is synergistic from this
point and ALZ’s residential landbank can provide FCL with a residential
pipeline in Australia.
Equity raising possible
The offer values ALZ at S$3.0bn and would push FCL’s gearing to 80%, which
is likely to be the highest management would allow. However, we wouldn’t
discount the likelihood of an equity raising either which could dilute major
shareholder’s ThaiBev and TCC which currently hold 28% and 60%
respectively. ALZ’s lower gearing of 27.7% would also average down FCL’s
gearing if the offer is successful in our view.
Valuations still compelling
We like FCL for its high presales of S$2.8bn in unrecognized revenue and a
low landbank (0.9mil sqf) relative to peers making it less sensitive to
residential price decline in Singapore. The Reit listing, high pre-sale,
undervalued retail portfolio and 4% dividend yield support are key positives.
FCL’s valuation is reasonable, trading on 43% discount to RNAV. We have a
BUY on FCL with TP of $2.20.