Singapore will likely provide plenty of ABS opportunities in the coming months, according to market sources, as Ascendas Real Estate Investment Trust, established by Ascendas MGM Funds in 2002, last week launched the second deal from its S$1 billion ($607.5 million) Emerald Assets vehicle.
BNP Paribas is arranging the 181 million ($236.9 million) transaction, secured by a S$380 million loan advance held over 23 industrial and commercial properties located in Singapore. The euros denominated deal was widely expected, given the high appetite for Singaporean real estate assets from European investors.
Ascendas first tapped the market in August 2004, with a 142.5 million CMBS via JPMorgan Securities and Overseas-Chinese Banking Corp., which priced at 33 basis points over Euribor (see ASR, 8/9/04).
There is no cross-collateralization between the properties included in the latest deal and the debut transaction. The upcoming deal will be backed by revenues generated on seven multi-tenant and 16 single-tenant buildings - mostly housing, light industrial, or hi-tech companies. Over half the properties are located in central Singapore.
The weighted average loan-to-value on the assets is 46.6%, which have a stressed debt service coverage ratio of 2.83 times and produce annual revenues of S$58.3 million. Both Fitch Ratings and Standard & Poor's have assigned triple-A ratings to the bonds, which have a 7.5-year expected maturity and legal final of 8.5-years.
Observers will keenly follow the pricing on the Ascendas offering. At the end of March, another Singaporean REIT - Suntec REIT - managed to price an 327 million CMBS at 16 basis points over Euribor. The offering, arranged by JPMorgan, comfortably established a new benchmark for Singaporean CMBS, and was only two points outside the tightest launch of any European CMBS (see ASR 4/4/05) in 2005.
While the level of offshore appetite was exceptional, the Suntec deal featured prime commercial and retail assets located in the heart of the central business district. Ascendas is securitizing assets used by the historically more volatile industrial sector, so some yield pick-up over Suntec seems likely.
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