After 2004's record volumes, the lack of any transactions from Singapore in the first couple of months this year has certainly been disappointing. Fortunately, the wait is almost over as Suntec Real Estate Investment Trust is set to launch an 327 million ($437.9 million) CMBS via JPMorgan Securities.
The currency of the bonds indicates the lead manager will look to exploit the extensive European interest in Singaporean CMBS. Most of the last year's CMBS offerings placed with European accounts, attractive yields offered for highly rated, good quality assets attracted buyers.
Suntec REIT, managed by ARA Asset Management, owns the Suntec City development, located in Singapore's central business district. The project comprises Suntec City Mall and Suntec Office Towers, a mix of prime office and retail buildings, with 98.9% occupancy for the retail space and 83% for the offices.
Suntec's CMBS, to be issued out of the Platinum AC1 vehicle, is collateralized by a S$700 million ($432.7 million) term loan facility and S$50 million revolving loan held over the properties, which was extended by JPMorgan in December 2004. Interest payments to investors will depend on the cashflows generated by the buildings.
The transaction has an expected December 2009, maturity date, the same time the loan is due to be repaid in full. Should the loan remain outstanding at that time, the borrower will pay additional interest to the issuer, of which a portion will be used to pay a step-up coupon to bondholders until the March 2011, final maturity date.
Both Fitch Ratings and Moody's Investors Service have assigned triple-A ratings to the notes, encouraged by the 38% loan-to-value ratio on the buildings, a 2.2 times stressed debt service coverage ratio, plus a S$37 million liquidity facility for the notes.
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