CIT: Show me the numbers.

I was asked by some if the proposed purchase by Cambridge Industrial Trust (CIT) is a good move. I went to SGX and downloaded the document on: PROPOSED ACQUISITION OF 25 TAI SENG AVENUE.

The property is valued at S$21.5m but is being sold at $21.1m to CIT and CIT has "sufficient financial flexibility and capacity to fund the Acquisition which is expected to complete by 4th quarter of 2010" which I interpret to mean that they do not need to do a share placement or rights issue.

I would rather like to have some numbers so that I could see if this purchase is income yield accretive but unfortunately, these numbers are not available.  Instead, the managers just say:

"The Manager believes that 25 Tai Seng Avenue is a quality industrial asset that has been purchased at an attractive yield which is comparable or better than yields of recent  transactions in the market.

"Additionally, the acquisition of 25 Tai Seng Avenue will further reduce the reliance of CIT’s income stream on any single asset and tenant, increase the weighted average lease tenure of CIT’s portfolio as at 30 June 2010 and reduce CIT’s lease expiry concentration in 2013 and 2014."

Can't do much analysis without the necessary numbers.

Saizen REIT: Divestment of properties.

Saizen REIT has managed to divest another four properties in its YK Shintoku portfolio.  A friend asked me if this is a good thing and my answer was an unequivocal "yes".  Why?

1. The plan to divest some properties of YK Shintoku to reduce the borrowing amount is with approval from the CMBS lenders. This shows that the lenders have no wish to foreclose YK Shintoku and would rather have their money back. In the meantime, they enjoy a rich 7.07% interest payment on the loan amount.

2. Saizen REIT's management is currently in negotiations with financial institutions to refinance YK Shintoku's loan and by divesting some properties, its absolute loan quantum is smaller and this makes it more palatable to potential lenders.  Like I mentioned before, a successful re-financing of YK Shintoku's loan would most likely result in a much lower interest rate which would lead to a positive re-rating of the REIT.

3. The properties divested are at smallish discounts to their most recent valuations.  The discounts are at 0.2%, 3.7%, 5.3% and 6.1% for the four different properties. This demonstrates the return of buying interest in the Japanese real estate sector as investors seek out better returns for their money.  This bodes well for Saizen REIT as the apartment buildings that they own are below replacement value.  This means that investors are unlikely to build new and would rather seek to buy in the resale market.

Following the loan repayment using sale proceeds from the divestments, the remaining balance of YK Shintoku's loan is estimated to be approximately JPY 6.6 billon (S$103.6 million). The loan was JPY 7.1billion (S$111.5 million) before.

See announcement here.

Related post:
Saizen REIT: Emphasis of matter.