First REIT

[helios]

i hope some of our forumers can shed more lights into this ...

extracted from 1Q08 ppt. released on 22-april:
1. Structure of First REIT emphasizes on stability and cushions unitholders from economic fluctuation or downside to the property market;
2. First REIT is a high yield investment - Distribution yield of 10.7%;
3. Property income boosted due to contribution for the 4 new Singapore properties, as well as rental increment for the Indonesian properties;
4. Diversification of assets –Singapore now accounts for 17% of the property values with the remaining 83% in Indonesia
5. First REIT has a target of raising its assets under management to S$500 million by 2009, from the current S$326 million.
6. First REIT continues to explore potential acquisitions with its Sponsor, Lippo Karawaci in Indonesia (i might need to ask my JKT to followup on any news in jakarta post... )

i wonder how's e progress on its china hospitals?

extracted from their past'07 press release:
7. In AUG'07, First REIT signed a Memorandum of Understanding (MOU) with Nantong Rich Hospital Co. Ltd. to invest in the property assets of a 500-bed hospital in Jiangsu province via a subscription of Redeemable Convertible Cumulative Preference Shares.

8. In SEPT'07, First REIT entered into a conditional agreement to invest in the property assets of the 200-bed Shanghai Woman and Child Healthcare Hospital and the proposed Hengshan Urology Hospital, both located in Shanghai.

9. In OCT'07, First REIT signed a MOU to acquire the 90-bed Wuxi New District Phoenix Hospital.

10. juz to supplement e point on old-folks cum nursing home: this is an increasing demand in singapore as our population ages ... i am attend'g e St Luke's ElderCare & Wellness Centre in Bukit Timah (New centre). TBC = official opening in July'08.

[tankie]

i hope some of our forumers can shed more lights into this ...
i wonder how's e progress on its china hospitals?

I just realised that even tho' I'm vested, I hv not been following up on their acquisitions. Too happy collecting the quarterly div till I become complacent!

After reading your post, I went to chk the SGX annc again on the 4 MOUs (u missed out one in Nov-07) signed for China assets. All of them hv an exclusivity clause for 2-3mths for them to perform due diligence, which'd hv expired by now. I also chk their recent results presentation n there were no mention on the progress of the China MOUs.

I decided to call their IR (Investor Relations) to ask them. You won't believe it, but they also can't give me an update! What I understood fm them is that it's still on-going but as these are MOUs, there's no guarantee that it'll materialize. My feel is that the Trust Mgr may not hv the necessary experience in China and that's why it's taking so long. The IR guy did mention that altho' the Gross Yield is very high, the nett yield may be low, due to the high tax rates in China and they're in consultations with their lawyers n consultants on how best to structure such acquisitions for better yields.

For reference, they gave me their website, here.

[mojo_]

I decided to call their IR (Investor Relations) to ask them. You won't believe it, but they also can't give me an update!

I do (believe it). I still remember well about 2 yrs ago, when there was severe flooding in Jakarta, you said you called them to find out if their hospitals there were affected. They said something like "Really? You mean there is flooding in Jakarta?"

(I am exaggerating of course but I remember it was something close... )

ps: it may be a blessing in disguise they haven't gone ahead, if the planned acq'ns had been in the vicinity of the tremors

[helios]

woww, thank you tankie & mojo:

yes, i do find it strange that their IR (fr media news) failed to communicate e part of China hospitals development ... why? being e fact that, they can ride on e medical tourism growth in china & olympics [do contrast this to HMI's communications].

we also need to find out e Imperial Aryaduta Hotel & Country Club does not seem a 'fit' for their portfolio of healthcare/ healthcare related properties... is it?

[tankie]

we also need to find out e Imperial Aryaduta Hotel & Country Club does not seem a 'fit' for their portfolio of healthcare/ healthcare related properties... is it?

U can get some info fm their IPO prospectus. Some extracts fm pg16,

Imperial Aryaduta Hotel & Country Club, located in LippoKarawaci, is a complex comprising a 197-room five star hotel (with 190 saleable rooms) and a country club providing a wide range of sports, recreation and food and beverage services. It is well positioned to benefit from healthcare tourism, given its location and the proximity to Siloam Hospitals Lippo Karawaci as the hotel provides convenient accommodation for out-of-town inpatients, outpatients and day-surgery patients, as well as their families. In addition, the hotel is preferred by business travellers as it is conveniently located near the business and industrial areas of the Tangerang, as well as the industrial areas of Cilegon, approximately 50 km from Lippo Karawaci.

I do (believe it). I still remember well about 2 yrs ago, when there was severe flooding in Jakarta, you said you called them to find out if their hospitals there were affected. They said something like "Really? You mean there is flooding in Jakarta?"

(I am exaggerating of course but I remember it was something close... )

This time round, the gentlemen I spoke to seems more familiar with the biz of FirstREIT. He spent some time explaining to me abt the fee structure for their Indonesia assets - maybe a smoke screen to stop me fm probing more abt the China MOUs

I extract fm the IPO prospectus,

The base rent is subject to an increase every year at a rate equal to two times the percentage increase of the CPI of Singapore for the preceding calendar year, subject to a floor of 0.0% and a cap of 2.0% while the variable rent is calculated based on a percentage of the growth of the Master Lessee Gross Revenue in the preceding calendar year.

IMO, the sad thing is the 2% cap wrt Singapore CPI, else with the high inflation we are facing now, we'd be getting a good increase to the base fee

The IR fella was pretty enthuastic abt the variable component. Extracts (pg66),

The variable rent is computed as follows:

(i) where the Master Lessee Gross Revenue for the preceding calendar year exceeds the Master Lessee Gross Revenue of the calendar year (“Further Preceding Calendar Year”) preceding the preceding calendar year by more than 5.0% but less than 15.0%, the variable rent shall be the amount which is 0.75% of the Master Lessee Gross Revenue of the preceding calendar year;

(ii) where the Master Lessee Gross Revenue for the preceding calendar year exceeds the Master Lessee Gross Revenue of the Further Preceding Calendar Year by 15.0% or more but less than 30.0%, the variable rent shall be the amount which is 1.25% of the Master Lessee Gross Revenue of the preceding calendar year; and

(iii) where the Master Lessee Gross Revenue for the preceding calendar year exceeds the Master Lessee Gross Revenue of the Further Preceding Calendar Year by 30.0% or more, the variable rent shall be the amount which is 2.0% of the Master Lessee Gross Revenue of the preceding calendar year.

He told me that for FY07, they got (ii). He further explained to me that with the high (min. 5% is usual) inflation rate in Indonesia, it's almost a given (my own words) that revenue will continue to grow at a healthy pace. He also pointed out to me that the variable component is based on the Revenue (not Profit), which makes it more significant.

I didn't get to ask more Qs or discuss abt risks due to my own time constraint and also, I must admit I wasn't very well prepared (didn't do much homework). Perhaps I shld get his h/p no. so that I can call him late at nite when I hv more free time!

[mojo_]

Some of the IR people do list their hp in the communication. I am finding it's a very good idea to interrogate them... I find varying quality ranging from very competent to blur sotong so I know at least who is managing my hard earned money... and whether I want to still leave it with them.

Great job you did - extracting a lot of interesting info from the First guy!

[helios]

oh my~

i didn't know that e lippo karawaci hospital has obtained US JCI accreditation ... good! (btw: all singapore hospitals r JCI-accrediated).

[lioninvestor]

Let us start to pressure the IR guy by all asking him about the China MOU.

[winston]

Not vested.

The following are some notes and Target Price that I have:-
1) DB - NAV 0.92
2) DMG 0.87 Dec 14
3) ML 0.84 Mar 5 from 0.9 June 4
4) UOB-KayHian 0.76 Nov 19

[helios]

in JKT, their medical travel is not well-tapped into & promoted by e govt, as compared to thailand (1), singapore (2), & m'sia (3): henceforth i'll have my reservations on e part on "business & medical travellers" explanation for Imperial Aryaduta Hotel & Country Club, unless this property is supported by critical mass of e rich locals to use it as a club-house? (assumptions only).

not vested yet, unless more of e china MOUs r revealed.