OUE C-REIT

[MINX]

Pros:
$50m Income support for 5 years provide good safety net projected 6.2% yield.
Acquired OUE office at $2500 PSF compared to OFC transacted at $2700psf
Rental yield average $10.40, key tenants include BOA Merrill. Potential rental reversion rates average $11-13 psf shows potential growth
Potential inclusion of One raffles place and old DBS tower into REIT ensure heavier singapore exposure
Management fees base on DPU, reputable REIT manager former from Ascendas.

Cons:
Highly gear at 43%, almost as high as K-REIT
China property bought deep discount at 30% to NAV (Potential lemon)
Key tenant lease to expire at late 2014/ 2015 (Pg 22 prospectus)

Although its split at 70-30 income distribution between Singapore and China, I am not comfortable with the China property. Possible for some hit and run IMO.

Mind sharing with me why you feel the china property is a potential lemon

[arriyana]

For those who are interested in OUE C-REIT, you could take a look at a very well researched and in-depth analysis of OUE C-REIT here by our contributor Sg Young Investor.


http://www.stokflok.com/content/oue-c-reit

[Shrivathsa]

Was looking at this, after reading the analysis, will steer clear.

[kayhian]

For the fourth quarter ended 31 December 2014, OUE Commercial REIT reported a revenue of $19.6 million, exceeding its forecast by 12 percent. Net property income was at $14.4 million, 14.9 percent better than forecasted, and distributable income also surpassed the projected target by 5.5 percent to $12.6 million. A distribution per unit of $0.0144 was declared.

[greentea]

OUE C-Reit to buy majority stake in One Raffles Place for S$1b-S$1.1b : http://businesstimes.com.sg/companies-ma...xtor=AL-18

[Nick]

Seems it is being priced at 4.5% gross revenue yield. They mentioned that they are expecting significant NPI growth from reversion since it is under-rented. Financing terms remains to be announced.

(Not Vested)

[krowten]

Deal is favorable to OUE and many value investors here have already anticipated the deal.

[MINX]

Deal is favorable to OUE and many value investors here have already anticipated the deal.

Is this a win-win for both parent & child or advantage only to OUE? Seems like OUE CReit will be in a much better position after this deal in terms of asset size, diversification etc.

[Nick]

I don't particularly think it is crazily advantageous for OUE (as compared to other sponsor asset sales in the past).

1) OUE stake in the vendor is approx 2/3 so it isn't getting the full payout.

2) OUE have to subscribe to CPPU so the cash realized will be locked up again.

3) If there is equity fund raising (unless placements), more cash will be locked up again.

4) Management fees are paid in units so cash remains locked up.

Granted, there will still be substantial cash realized from the sale to be deployed.

OUE C-REIT performance fees is linked to DPU growth so I doubt the management would do something value destructive. I think its also the first time I seen a REIT acquire quasi-freehold assets from sponsor. The key lies in the financing terms - engineering a deal so that it can be DPU accretive. I played some rough models and I think it can be accretive if the bank loan is secured low enough and equity fund raising is kept to minimal with CPPUs used instead since it has lower cost.

I don't think there will be tax benefits since it isn't a direct stake in the property ? Rental income will likely be taxed at asset level me thinks.

(Not Vested)

[butcher]

Think if sales are at market valuations (arms-length transactions), everything should be ok as fair to everyone.

Are the financing details finalised already?