a) Repayment of borrowings
The bulk of SGREIT's borrowings (~S$617m) is due for refinancing in FY10. SGREIT will prepay some of these borrowings with proceeds from the Rights issue in order to strengthen its balance sheet and put itself in a better position to renegotiate for better refinancing terms when the other borrowings are due in FY10. There will be no prepayment penalty for the borrowings.
b) Asset enhancement initiatives
Part of the proceeds may be utilized for asset enhancement initiatives at Wisma Atria. The plot ratio of Wisma has not yet been fully utilized. Management is planning to increase the GFA by 40,000 sq ft which will cost approximately S$100m.
c) Acquisition
SGREIT sees acquisition opportunities in mature markets such as Singapore, Australia and Japan that could arise as credit market remains tight.
2) Property Valuation
- The decline in property valuation was largely due to its office assets. This situation was similar to CapitaCommercial Trust, where independent valuers have assumed higher cap rate (15 bp increase for SGREIT's Singapore office assets) and steeper decline in office rents in the valuations.
- Valuations of retail properties remain largely unchanged.
3) Credit market condition remains challenging
Local lenders have been filling the lending void that has been left behind by foreign banks that have either pulled out or scaled back their operations in Singapore. Demand for real estate loan may be too much for the local lenders to absorb and thus leading to the tight credit market condition. The CMBS market remains shut.
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