Property developer YTL Corp took over the Macquarie Group’s entire interest in Singapore-listed Macquarie Prime real estate investment trust (REIT) in an all-cash deal worth RM682.8 million late last month.
YTL said the deal had it paying RM1.96 a unit for 247.1 million units in the REIT, about 26 per cent of the total, valuing the stake at RM484.7 million. The price is a 49 per cent discount to Macquarie Prime REIT’s net asset value.
The remaining RM191.4 million is meant for Macquarie’s 50 per cent stake in the REIT manager, which will allow YTL to control the REIT, said YTL Group managing director Tan Sri Francis Yeoh.
Based on Bloomberg consensus estimates, the deal provides a 2009 yield of about 9.4 per cent. Yeoh said it offers ‘very compelling returns in Singapore dollar terms’ and reflects his optimism about the Singapore property market.
The REIT currently owns RM5.26 billion of retail and office properties in Singapore, Japan and China; it has stakes in Singapore’s Wisma Atria and Ngee Ann City along Orchard Road.
YTL is also developing two luxury villas on Sentosa Island. Last year, it acquired the prime Westwood Apartments site at Orchard Boulevard for RM1.04 million.
Yeoh, who will be appointed the REIT manager’s executive chairman upon completion of the deal, said: “I’m very confident Singapore will pull through this little turbulence … even if they have a crisis they will always come out ahead of the curve.”
He added that Macquarie Prime will be rebranded Starhill Global REIT and will be YTL’s main vehicle for acquiring yield accretive prime retail space in Asia and the West. He also revealed he will be working with principals in the fashion, food, watch and jewellery industries to boost yields in its luxury malls.
Challenging equity and debt conditions on account of the sub-prime crisis and tightening credit market conditions have led to attractive valuations, said Keith Magnus, Merrill Lynch’s head for Singapore and Malaysia investment banking and YTL’s strategic adviser for the transaction.
Earlier in February, Macquarie Prime announced it was undergoing strategic review which could lead to Macquarie Group selling its stake in the REIT. Then known as Macquarie MEAG Prime REIT, it is said to have received more than 20 expressions of interest from unnamed parties.
In May, MEAG Munich Ergo AssetManagement’s 25 per cent stake in the REIT’s manager was sold to Pacific Star, a Singapore-based fund management company. The deal resulted in Pacific Star and the Macquarie Group each with equal shares of the REIT manager. Macquarie’s 50 per cent stake now belongs to YTL.
YTL Group currently controls Starhill REIT, Malaysia’s largest REIT with four properties in Kuala Lumpur valued at approximately RM1.57 billion. Yeoh did not rule out any merger of the two Starhill REITs, adding that it will be done if there is equitable interest for all.
