Suntec REIT, managed by ARA Asset Management, completed a 327 million ($437.9 million) CMBS via JPMorgan Securities last week, backed by the cashflows generated on the Suntec City Development, located in Singapore's central business district.
The transaction, issued out of the Platinum AC1 SPV, has an expected maturity of 4.5 years, and priced at 16 basis points over three month Euribor. The single-tranche offering was rated triple-A by Fitch Ratings and Moody's Investors Service. The deal smashed the previous marks of 32 basis points over Libor set last August by CapitaMall Trust's $215 million CMBS via HSBC (see ASR 8/18/04) and 33 basis points over Euribor on Ascendas REIT's 142.5 million deal, also arranged by JPMorgan.
At the time, those levels were much acclaimed by neutral observers, and seemed to further indicate overseas buyers' attraction to high-quality Singaporean CMBS. Even so, Singaporean spreads then were at least 10 points wider than European paper. Not any more, however. Suntec's transaction came just two basis points outside the tightest launch of any European CMBS offering, established last month by Prologis on an 389 million transaction.
"This is an enormous achievement for Singaporean CMBS," remarked a banker close to the deal. "Although JPMorgan worked very hard educating investors on the merits of Singaporean CMBS, the fact is this asset class has become more transparent and widely accepted with European and Asian investors.
"Platinum is the largest CMBS to date from Singapore and investors were attracted to the quality of the collateral given the fact the property involved is the largest integrated [office and retail] commercial development in Singapore," the banker added. "Additionally, investors like the fact that Suntec REIT is a public company and, as such, is more transparent."
The banker said over 20 investor accounts participated, with 26% ending up in Asia, 25% in Germany, 24% in Ireland, 11% in Spain and 7% in the Benelux countries. Roughly 70% were bank investors, with 22% placing in structured investment vehicles and the remainder purchased by asset managers.
Although it has been a slow start to the year for Singaporean securitization - Suntec's was the first completed deal - a surge seems likely in the coming months, with JPMorgan and HSBC preparing CMBS transactions for other issuers.
On a broader note, given the recent pricing successes of ex-Japan Asian issuers, it is tempting to believe the market is set for a period of unprecedented issuance. The higher costs associated with securitization in Asia have often been cited as a reason for its slow growth. But this is now no longer the case and it stands to reason more issuers will consider ABS deals.
"Although pricing won't always be the deciding factor, it clearly makes the sell job to make them pull the trigger easier," commented one head of ex-Japan Asian ABS at a European underwriter.
"Yes, this will lead to much more issuance. Once the pricing of ABS is comparable with straight debt, everybody starts to do it because securitization has significant additional benefits than other funding methods," added another Asian ABS veteran.
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