Boustead Singapore

[greengiraffe]

http://boustead.listedcompany.com/newsro...ABD9.1.pdf

Finally some overdue good news in the offing:

i) first 3 companies likely related to the establishment of stapled REIT - would be the first of its kind for Singapore listed company that has stapled REIT on a company instead of a REIT;

ii) the remaining 2 is a long overdue design, build and lease vehicles - SCC & EA - what companies would they be...

Vested
HU8TPPY

[ksir]

http://boustead.listedcompany.com/newsro...ABD9.1.pdf

Finally some overdue good news in the offing:

i) first 3 companies likely related to the establishment of stapled REIT - would be the first of its kind for Singapore listed company that has stapled REIT on a company instead of a REIT;

ii) the remaining 2 is a long overdue design, build and lease vehicles - SCC & EA - what companies would they be...

Vested
HU8TPPY

SCC sounds very familiar, don't know if it is related to previous post of photo with Mr.Wong in it? (:
My wild guess of EA will be Electronic Art, probably data center?

(Vested)

[Nick]

http://boustead.listedcompany.com/newsro...ABD9.1.pdf

Finally some overdue good news in the offing:

i) first 3 companies likely related to the establishment of stapled REIT - would be the first of its kind for Singapore listed company that has stapled REIT on a company instead of a REIT;

ii) the remaining 2 is a long overdue design, build and lease vehicles - SCC & EA - what companies would they be...

Vested
HU8TPPY

My humble guess is that IF such a reit was ever listed, Boustead will retain a substantial stake to maintain its recurring income. This is similar to what SPH is planning to do with the proposed REIT listed. So the question is why ? I think Boustead might be using the REIT to compete for DB&L deals which is currently being dominated by REITs due to their tax-free status. What do you think ?

(Not Vested)

[shanrui_91]

My humble guess is that IF such a reit was ever listed, Boustead will retain a substantial stake to maintain its recurring income. This is similar to what SPH is planning to do with the proposed REIT listed. So the question is why ? I think Boustead might be using the REIT to compete for DB&L deals which is currently being dominated by REITs due to their tax-free status. What do you think ?

(Not Vested)

I agree with you. The plan has never been about realising value from the portfolio but to be able to derive recurring income add stability to earning. Else, he will have simply sold them off as he did in the past. After building it to a certain size, they can derive management fee from it and continue expanding their DBL portfolio which can be recycled to the reit.

With interest expense likely to rise soon ( 3 mths SIBOR is now 0.38% compared to historical mean of 1.42%) and the dividend yield of reit going up as price goes down, a reit will put Boustead at a better competitive position to secure DBL project. Boustead has the cash flow and cash to support the project whereas the REIT is highly dependent on debt. And as dividend yield goes up, it will be harder to do a yield accretive build to suit project for the industrial reit.

Let's wait and see what kind of REIT structures did he come up with.

(vested)

[greengiraffe]

It is going to be a stapled REIT. There are presently 2 such structures listed on SGX - CDL H Reit and FE H Trust. However, both such REITs are stapled onto business trusts. Both business trusts are largely dormant till they are activated for development since business trusts do not have a gearing limit unlike the 60% limit imposed on sing based REIT.

In Boustead's case, there is no need for a business trusts since Boustead is financially very strong. As previously indicated during the final results conference call, it is likely to be a REIT that is being stapled onto the parent share and is unlikely to have a separate listing.

The REIT structure will have tax efficiency:

$12m pretax rental income will become tax free- ie around 2.37 eps tax free.

However, in compliance REIT status, 90% of such tax free income must be distributed - so Boustead holder can be assured of at least 2.1 cents in distributable income from the stapled REIT.

In addition, there is also a need to revalued the assets for the stapled.

Akan Datang
Vested
GG

[dzwm87]

I remember Wong FF mentioning that they have the expertise in designing and developing industrial properties while the industrial REIT players are more competent in managing the asset portfolio. So this was how Boustead position themselves against the REITs competitors.

For REITs, property development is limited at 10% of total assets. Anybody know if the limit still holds if it's a DBL?

[freedom]

Sorry that I don't grasp what's the benefit of the REIT.

If Boustead can't compete on price with itself, why all of sudden can a Boustead majority-owned REIT compete on price?

Who is going to foot the bill? Apparently still Boustead for majority.

If Boustead really wants the REIT to compete on price, it will not be majority-owned. Quite the opposite, the least it owns, the better for Boustead, IMO.

The other point is why a corporate structure has so much effect on competitiveness? What's the benefit to wholly own a REIT? Just the little tax benefit?

[wee]

Sorry that I don't grasp what's the benefit of the REIT.

If Boustead can't compete on price with itself, why all of sudden can a Boustead majority-owned REIT compete on price?

Who is going to foot the bill? Apparently still Boustead for majority.

If Boustead really wants the REIT to compete on price, it will not be majority-owned. Quite the opposite, the least it owns, the better for Boustead, IMO.

The other point is why a corporate structure has so much effect on competitiveness? What's the benefit to wholly own a REIT? Just the little tax benefit?

The benefit is that they can price their DBL projects based on price that makes sense to reits but not to a corporate. I think its not so much about competing purely based on price, but more of levelling the playing field with the competition. As you rightly pointed out, the benefit comes from corporate tax savings. 17% tax on profits could mean the difference between a 5% yield and a 6% yield, so its not insignificant.

[freedom]

Sorry that I don't grasp what's the benefit of the REIT.

If Boustead can't compete on price with itself, why all of sudden can a Boustead majority-owned REIT compete on price?

Who is going to foot the bill? Apparently still Boustead for majority.

If Boustead really wants the REIT to compete on price, it will not be majority-owned. Quite the opposite, the least it owns, the better for Boustead, IMO.

The other point is why a corporate structure has so much effect on competitiveness? What's the benefit to wholly own a REIT? Just the little tax benefit?

The benefit is that they can price their DBL projects based on price that makes sense to reits but not to a corporate. I think its not so much about competing purely based on price, but more of levelling the playing field with the competition. As you rightly pointed out, the benefit comes from corporate tax savings. 17% tax on profits could mean the difference between a 5% yield and a 6% yield, so its not insignificant.

Sorry that I can't agree with such reasoning. If that's the simple case, shouldn't every property owning company is structured as a reit?

[dzwm87]

To enjoy such corporate tax savings, you would need to distribute at least 90% of your taxable net income. As Boustead was not structured as a REIT, they were unable to do so and hence, REITs were more price-competitive against them. But like I said, Boustead positioned their competency based on their expertise in designing and build while REITs simply manage and enhance their portfolio and tenant mix.

Not every property owning company can be structured as a REIT. You need to hit a critical mass in order to do so. Companies which have investment properties (like Hupsteel?) generating rental income are still too small to allow a meaningful distribution to their investors. That is why REITs tend to have a sponsor which will supply a pipeline of assets for them to generate rental flow. Think Keppel for K-REIT.

So Boustead is in a position where they are able to hit the critical mass though they are still a while more to go. If I remember correctly, they need another S$200mln worth of properties portfolio to go before they can spin off a separate REIT by themselves.

And this was why Wong FF is considering alternative to unlock their industrial property portfolio - either through a stapled REIT or by being a sponsor to other existing stand-alone REITs.