Frasers Centrepoint acquires Allco Commercial Reit

July 8 – Frasers Centrepoint today announced that it will acquire a 17.7 per cent stake in SGX listed Allco Commercial Real Estate Investment Trust and 100 per cent of the REIT’s manager, Allco (Singapore) Limited from Allco Finance Group for S$180 million.


FCL will obtain 125.6 million units of Allco REIT at a unit price of $0.83

Allco REIT has a market capitalisation of S$504 million

Allco REIT has S$2 billion of commercial properties located in Singapore, Australia and Japan.

On 8 July 2008, Allco REIT announced 2 independent valuations of 2 seperate properties, the results returned are a 8.7% and a 13.8% decrease of previous valuations.

we should assume that Allco's actual NAV is significantly lower then the current official figures

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FCL Chief Executive Officer, Mr Lim Ee Seng said

Frasers Centrepoint is one of Singapore’s largest property companies.
Already has a shopping mall reit listed on the SGX

The Singapore Exchange had recently on 25 June 2008 issued an eligibility-to-list to FCL for the listing of its planned commercial REIT. With the acquisition of the Allco REIT units and the manager, FCL will terminate the listing plans and intends to offer the current portfolio of commercial assets as a potential pipeline for the acquired Allco REIT

F&N plans to inject Alexandra Point, Alexandra Technopark and the office and ancillary retail components of Valley Point, into Allco Reit.

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Upon completion of the transaction, Allco REIT will be renamed Frasers Commercial Trust, and it will be the vehicle through which FCL will further its commercial property activities

This is when the share price will start climbing up and the yield start going down - if market conditions permit - once the yield goes down enough, F&N can inject in their properties and call it "yield accretive"

take note - 'upon completion', more info below.

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We have clear plans to bolster and strengthen the financial position of Allco REIT. FCL, as part of the Fraser & Neave Group, will be able to assist Allco REIT in negotiating the refinancing of its existing loans, which will bring clear benefits to Allco REIT’s unit holders.” said Mr Lim.

Under FCL’s management, Allco REIT is set to grow by leveraging on a ready pipeline of assets comprising S$700 million worth of commercial assets owned by FCL in Singapore.

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Completion of the SPA is conditional upon certain conditions precedent being fulfilled or waived on or prior to 30 September 2008

(1) the Monetary Authority of Singapore not raising an objection to FCL acquiring ASL;
(2) receipt of Australian Foreign Investment Review Board approval for (or no-objection to) the Acquisition;
(3) waiver of certain covenants under Allco REIT’s financial indebtedness to Commonwealth Bank of Australia;
(4) no breach of certain representations, warranties and undertakings given by the Sellers under the SPA; and
(5) no occurrence of certain even

Completion of the Acquisition is currently expected to be on 6 August 2008.

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Hmm..so 6 August and 30 september are important dates for people invested in Allco Reit. Personally, I believe that should the SPA be successfully completed on 30 september, Allco will definately be worth much more then its current $0.765 price.

Its unaudited NAV is now $1.44, with a comfortable 'recession safeguard' of 30%, the nav is still at $1.08 or $1.

F&N is paying a price of $0.830 per share, still 65 cents more then today's closing price. Those buying in now are betting the deal will be successful. If somehow, the deal is called off, i think allco's share price can go even lower then $0.700..mainly because of their enormous debts, worth half their assets and all due in 2009.

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More info

S$2,045.5 million in total assets (probably will be revalued lower)
S$916.9 million in borrowings - all due in 2009 (thats almost $1 billion or half its total assets)

Portfolio Occupancy is 97.5%, down from 98.8%
current forecast dividend yield at $0.765 is 8.36%

net property income of S$22.1 million
amount available for distribution of S$11.3 million

if F&N can lower its borrowings/finance expenses, the DPU will be positively affected.

Japanese currency income hedged for 5 years at S$1.00 = ¥72.93
Australian currency income hedged for FY2008 at A$1.00 = S$1.1904

last point to note. If the SPA is successful. Then F&N will take over the financing/debt responsibilities ! if that happens, All current investors can take a huge sigh of relief.

USD to eventually hit a new low again ?

The recent events in the US got me thinking...but such things take time....Sovereign wealth funds, pension funds, private funds, Those that have billions of dollars, they take time to 're-adjust'.

so after the recent events, the usd have gone down due to shorting by retailers/speculators/small timers, when will the effect of the big guys 'bailing out' come in ?

i think we are already seeing the effect of them 'shunning' the usd, causing it to 'rot' at the bottom end of the trading range.

now we can wait for the effect of them 'moving out' of the usd. i believe that is already happening quietly behind the scenes

IndyMac collaspe - it was already expected

"IndyMac grew rapidly during the real estate and home building boom. Its specialty was so-called Alt-A loans, those for which home buyers were asked to produce little or no evidence of income or assets other than the house they were buying."

"Over the past two years, IndyMac dropped over 95% in stock price, or about $3.5 billion in market capitalization. By Friday, shares were down to 28 cents"

source : CNN money


still...this could be the start of something bad

allco reit - interesting

probably a steal now, oh well, did not really research into it, as long as F&N can provide a stable finance base and the economy allows an OK rental yield.....

reply to comment

"Singapore property has plunged a lot, which property stocks are good now?"

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* personal opinion

The property market now is only beginning to decline, forget the past and look to the future, more inflation, unstable outlook, global economy slowing, consumer spending in all countries around the world are getting hit by inflation

America buying less
Europe buying less
Vietnam in trouble as inflation collides with a 'slower' economy
China slowing down but still managing the situation
India is somewhat protected as their economy is not manufacturing dependent like vietnam and china

No demand slowdown so far for fossil fuels / mineral ores / food, in fact the prices of this commodities are increasing

Local factors - the F1 race in singapore did not bring in the anticipated hotel bookings. Construction cost has gone up significantly and finally, there is a 'lack of potential' for property prices to go 'higher then 2007', so we can forget about the potential upside because there is only a potential downside for now.