Singapore-based Jurong Point Realty (JPR) will follow the example of other property developers like CapitaLand and Ascendas Real Estate by launching a CMBS offering. Local firm Overseas Chinese Banking Corp. is arranging the S$227 million ($134.8 million) deal, to be placed via the Winmall SPV.
The transaction is backed by a first registered mortgage held on the seven-floor Jurong Point shopping center. Currently, the center has 100% occupancy and is independently valued at S$525 million, with annual income of around S$37.2 million.
JPR, a joint venture between Lee Kim Tanh Holdings and Guthrie GTS, will use proceeds from the sale towards working capital and repaying existing debt.
The deal has been split into four rated and three unrated tranches, with expected maturities of five years and legal finals of 6.5 years. Both Fitch Ratings and Standard & Poor's have assigned triple-A ratings to the two senior pieces - comprising S$70 million of floating-rate and S$89 million of fixed-rate paper. In addition, the S$32 million class-B notes and S$13 million C-bonds are rated at double- and single-A, respectively.
Credit enhancement comes principally through overcollateralization, with the unrated tranches totaling S$316 million. The debt service coverage ratio on the triple-A paper is 2.40 times, with an average loan to value of 35%.
Meanwhile, Japanese property companies are keeping busy as well. HSBC is putting together a securitization involving a currently empty 10,000-meter squared lot owned by Dynacity Corporation. The deal will be backed by income on a 20-year lease to home improvement company Kohnan Shoji, which plans by Spring 2005 to build a store on the site, located in Tokyo's Koto district.
It is rare for idle land to be securitized, but property companies are increasingly turning to the technique to monetize such assets rather than have them on balance sheet. Under new accounting rules that will come into effect in the next fiscal year, unused property will be regarded as a loss on financial statements.
HSBC will sell Y4.3 billion ($39.2 million) of trust certificates to institutional investors. The bank is also thought to have secured the participation of an unnamed offshore investment fund, which will buy the unrated equity part of the deal.
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