Singapore Corporate News - 17 Apr 2008

Parkway Life Reit agrees to buy property in Japan

PARKWAY Life Reit will soon add an overseas property to its portfolio, following an agreement to buy a distributing facility in Japan for 2.59 billion yen (S$35 million).

The Reit's manager, Parkway Trust Management, yesterday said Parkway Life Reit has agreed to acquire a two-storey building named J-REP Matsudo II with a net lettable area of about 3,240 square metres.

The freehold property, in Chiba prefecture's Matsudo city, offers an initial net yield of 5.3 per cent. Parkway Trust said there is potential to increase the net lettable area as the current ratio of the building's floor-to-land area is only 40 per cent, while the allowable ratio is 200 per cent.

Completed in 2005, the building is currently leased by logistics firm Nippon Express Co, which has an A2 credit rating. Nippon, in turn, has a back-to-back lease with its partner Inverness Medical Japan Co. Inverness uses the property to manufacture, sell and distribute its diagnostic test kits and medical devices.

'We are very excited about Parkway Life Reit's first investment in Japan,' said Parkway Trust Management CEO Justine Wingrove. 'This is a key market for us as the demand for good quality healthcare real estate assets is expected to grow, driven by the fact that by the year 2050, it is predicted that one in three Japanese will be over 65 years of age.'

The master tenancy agreement with Nippon will expire in nine years' time. The property was valued by Colliers Halifax to be worth about 2.619 billion yen, as at last month.

Parkway Life is making the investment through its wholly owned subsidiary Matsudo Investment Pte Ltd. The seller of the property is J-REP Co, whose majority shareholder is Macquarie Goodman Asia.

The investment, to be funded through debt, will increase Parkway Life's gearing to 8 per cent, from 4 per cent. With its 'BBB+' credit rating, the Reit can have about $1.2 billion worth of additional debt capacity.

Parkway Life did not reveal how much the investment will add to its distribution per unit (DPU), only saying it is 'yield-accretive'.

Between last August, when it was listed, and end-December, Parkway Life posted a distributable income of $13.64 million, leading to a DPU of 2.27 cents.

Shares of Parkway Life ended two cents down at $1.19 yesterday.

Court directs Regent Garden sale to Allgreen to proceed

THE stop-start en bloc sale of Regent Garden, a 31-unit West Coast Road condominium, to Allgreen Properties looks set to finally go through after the High Court yesterday directed the majority owners to complete the agreement.

The court also ruled that the Strata Titles Board's decision in January to reject the deal was irrelevant and ordered the majority owners to pay costs to Allgreen, the developer.

The agreement with Allgreen, originally signed in April last year, was first delayed when six owners out of the 31 held out.

When the dissenting six finally agreed to sell out by November, the majority owners, who together own 25 units and over 80 per cent of the share value in Regent Garden, did an about turn and tried to abort the deal, arguing that the $34 million sale price was too low partly because of a wrongly estimated $7.2 million development charge.

They wanted the High Court to void the agreement, or alternatively, to award damages or an addition to the sale price.

Allgreen, represented by Davinder Singh of Drew & Napier LLC, itself went to the High Court in mid-January to ask for an order requiring the majority owners to complete the sale deal. The six minority owners joined in the proceedings as well.

But on Jan 30, the Strata Titles Board ruled the sale had not been done in good faith because Regent Garden's valuation was wrong and well below the market price.

Yesterday, Allgreen said in a statement that 'the decision by the High Court is a victory for the sanctity of contract and is a strong message that owners will be held to their bargain'.

'The court's decision is very good news for the entire industry,' said Allgreen.

The majority owners were represented by Molly Lim of Wong Tan & Molly Lim LLC.

Banyan Tree may set up more development funds

MANAGER and developer of premium resorts and hotels Banyan Tree Holdings may set up more real estate development funds to support expansion in Japan and the Middle East.

'Our rapid expansion demands relatively large capital injections,' said vice-president of business development Paul Chong yesterday at the Cityscape Asia property conference.

Banyan Tree is creating closed-end funds to meet these needs and 'over the medium term, we hope to apply this strategy to our other growth regions around the world', he said.

Five growth regions were identified - the Americas, southern coastline of the Mediterranean, the Middle East, Indian Ocean and Asia-Pacific.

Details on the potential sizes or investors for the Japan and Middle East funds are not yet available.

Banyan Tree in January set up its first US$400 million Indochina hospitality fund to finance resort development in Hue, Vietnam.

The first closing took place in February and the second round of capital-seeking is now underway.

According to Mr Chong, group chairman Ho Kwon Ping is now in the Middle East for the Indochina fund roadshow, and the company hopes that final closing will take place by the end of the year.

The sub-prime crisis and the resulting credit squeeze do not appear to have dampened investors' interest in the Indochina fund. 'Although there is a global reduction in liquidity, there is still money out there to be invested,' said Mr Chong.

While the Indochina fund is only open to institutional investors, Mr Chong mentioned the possibility of listing it in about seven years' time.

The 280-hectare development in Vietnam will house seven resorts, two of which will be run by Banyan Tree. According to Mr Chong, the group has received '13 or 14 expressions of interest' from international hotel operators for the remaining resorts, and ground-breaking may occur in the middle of the year.

The project costs about US$850 million, and will be funded by both debt and equity.

Banyan Tree further plans to set up a China fund to raise US$500 million to US$700 million for its projects in China.

On prospects for Banyan Tree, Mr Chong said: 'When you find yourself in a global space with no single dominant global player, and you have a more than even chance to be a price maker and not price taker, you have no choice but to go for it. The window of opportunity, I think, will close in around five years or so.'

Banyan Tree's shares closed at $1.32 yesterday, up one cent.

NOL also looking at merger options

NEPTUNE Orient Lines (NOL) reiterated its stance that it is looking at all opportunities to enhance shareholder value, including merger options, at its annual general meeting yesterday.

'We have to look at all opportunities available to improve shareholder value,' chief executive Thomas Held told reporters when asked about persistent rumours of a deal with German giant TUI's Hapag-Lloyd shipping arm.

Dr Held has said previously that he wants the company to take an active role in the consolidation process in the industry. He said now that the issue is in the public sphere - having been reported in the press both in Europe and locally - it remains to be seen which market rumour proves to be accurate eventually.

He maintained, however, that the company would not comment on these market rumours because doing so would not be in the interest of shareholders as it can lead to wild fluctuations in NOL's share price.

Among the parties that have been reported to be interested in buying Hapag-Lloyd are German shipping line Hamburg Sued, Denmark's AP Moeller Maersk, France's CMA CGM and an unnamed Korean shipping company. In addition, a group of German investors led by private bank MM Warburg is believed to be rallying together to keep the company in German hands.

Market watchers have said that NOL and Hapag-Lloyd are a good match as the former's strength on trans-Pacific and Asian routes would complement the German line's focus on trans-Atlantic and Asia-Europe routes.

The other frequently raised point about the likelihood of success of a deal is the fact that the NOL chief executive is German, which is seen to be beneficial in smoothening the path to any potential merger.

NOL shares closed five cents higher at $3.28 yesterday.

AIDT unveils $560m India development project

ASCENDAS India Development Trust (AIDT) has unveiled a $560 million integrated development project in India, the second Indian venture to be announced by it this month.

This second project will have a 4.27 million sq ft IT special economic zone (IT SEZ) and a 2.6 million sq ft residential and commercial component in Gurgaon, about 45 km away from the business district of Delhi.

AIDT, a private property development fund spearheaded by JTC Corp's fully owned Ascendas, will hold a 51 per cent stake in this project, with the remaining 49 per cent held by Dr Fresh Healthcare Services Pte Ltd, a joint venture between US-based Dr Fresh Inc and Indian consumer goods group Dabur.

The project, which will be managed by Ascendas, will be developed over seven years on a 25.1-hectare freehold site along the Sohna State Highway. 'The development is expected to be executed in phases to meet market demand, with the first phase to start in September 2008,' Ascendas said in a release yesterday.

The IT SEZ component is expected to accommodate more than 40,000 skilled professionals.

The development is poised to be one of Gurgaon's premium business addresses.

AIDT, which undertakes greenfield development projects, has granted a right of first refusal to Singapore-listed Ascendas India Trust to acquire substantially income-producing business space in India.

Earlier this month, AIDT announced a 50:50 joint venture with Indian real estate fund IREO to develop a $290 million project in Coimbatore in Tamil Nadu state.

Ascendas is a significant co-investor in AIDT. The other investors include Arcapita of Bahrain and ING Private Banking.

China Eratat IPO subscribed 1.2 times

SPORTSWEAR company China Eratat yesterday said its initial public offering (IPO) was subscribed 1.2 times, with both placement and public tranches seeing strong support.

The company said institutional investors such as Legg Mason, Lloyd George, Deutsche Asset Management, DBS Asset Management and Black River Asia Fund had each taken up 5 per cent or more of the total invitation shares.

The net proceeds of $34.3 million will be used to fund the company's expansion and to strengthen its brand image. Share trading begins this morning.

CWT looks for business opportunities in M'sia

CWT, a logistics firm, yesterday said it has signed a memorandum of understanding with Tamadam Bonded Warehouse Bhd to pursue and develop logistics business opportunities in Malaysia.

It said a joint venture company will be established to undertake logistics projects developed in Malaysia.

Tamadam owns and manages storage facilities as well as provides distribution and delivery services, among other things.

Tastyfood poised for delisting

TASTYFOOD Holdings is poised for delisting after it was told by the Singapore Exchange it will not get any more time to find a new business. Tastyfood had become a cash company on July 29, 2006 after selling its old business.

It had said on April 1 it would acquire Stellar Land Holdings in a bid to stay listed, but SGX noted that the deal was at an early stage and may not meet requirements for a reverse takeover. SGX also noted that the company was technically insolvent and so would not get a further extension of time beyond the April 25 deadline.