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Was looking at this, after reading the analysis, will steer clear.
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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)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
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Deal is favorable to OUE and many value investors here have already anticipated the deal.
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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)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
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Think if sales are at market valuations (arms-length transactions), everything should be ok as fair to everyone.
Are the financing details finalised already?