Imteresting deal. Pretty much doubles its size. As a unitholder, I'm pretty keen to see the valuations and yields for these properties. Another 200m+ loans is a little worrying, but I hope they know what they're doing.

UOA REIT may buy office blocks for RM500m

UOA Real Estate Investment Trust said it is considering a plan to buy two office blocks in Kuala Lumpur for RM500 million.

UOA REIT received an offer from UOA Holdings Sdn Bhd, a substantial unit holder of the trust, it said in a statement today.

The assets are a tower block comprising 15 levels of office space in Bangsar, Kuala Lumpur, and another 16-floor building, it said. -- Bloomberg

how it is going to finance the purchase? right issue?

how it is going to finance the purchase? right issue?

UOA Real Estate Investment Trust (REIT) (5110) is considering buying two office blocks in Kuala Lumpur for RM500 million.  It received an offer from UOA Holdings, a substantial unitholder in UOA REIT, for the sale of Parcel B Menara UOA Bangsar and Wisma UOA Damansara II, priced at RM289 million and RM211 million respectively.  "The board of directors of the manager (UOA Asset Management Sdn Bhd) and OSK Trustees Bhd (trustee) will deliberate on the terms and conditions contained in the offer letters and a further announcement will be made upon completion of the deliberation," UOA REIT said in a statement to Bursa Malaysia Bhd.  Parcel B Menara UOA Bangsar, located in Jalan Bangsar Utama 1, comprises a tower block with 15 levels of office space, three levels of retail podium, six levels of elevated car park and four levels of basement parking. The newly completed commercial and retail property, which has a 99-year leasehold tenure, is 88.5 per cent occupied.  Wisma UOA Damansara II, located at Changkat Semantan, comprises a 16-storey office building and five levels of basement parking.  The two-year-old freehold property, used for commercial and retail purposes, is 87 per cent occupied.  The purchase of Parcel B, Menara UOA Bangsar, will involve a refundable deposit of 0.01 per cent, or RM28,900; a cash payment of RM156.03 million; and the issuance of 102.26 million new REIT units.  The purchase of Wisma UOA Damansara II will also involve a refundable deposit of 0.01 per cent, or RM21,100; a cash payment of RM113.92 million; and the issuance of 74.66 million new REIT units

how it is going to finance the purchase? right issue?

I do not think Cash Payments referred to the cash kept in their banks. Most likely it is in the form of borrowing.

Remember they pay out 90% or more of the realised profits ( DPU )  to you,  in order to be tax exempted

Where  is the MAGIC cash to come from , in large amount ?

These press statements fool a lot of investors , esp those are new and eager to  just jump on board.

Too high a gearing ( borrowing )  caused many Singapore REITS in financial problems.

If one does not have the transparency to disclose their  gearing but saying it is using CASH to pay. I would think twice before investing. There is a purpose behind a purpose.

We reserve the right  to be  the doubtful, simply because our hard earned money is involved.

Yup thats y i neither top up or sell off my UOA yet as i am still not clear what they are going to do and haven't got time to check how much cash reserve they have but i believe not much as like what you have said 90% of the profit will be paid as dividend. I think they will definitely raise up their gearing for sure as UOA gearing is lower compare with HEKTAR, AXREIT but higher than atrium of course or  maybe issue some rights.

Many REITS are expansion paths.

So Gearing is one to be  monitored closely, bcos it tends to boost up or preserving earnings or DPU .

More right issues tend to dilute earnings per unit.

I do not think Cash Payments referred to the cash kept in their banks. Most likely it is in the form of borrowing.

Remember they pay out 90% or more of the realised profits ( DPU )  to you,  in order to be tax exempted

Where  is the MAGIC cash to come from , in large amount ?

These press statements fool a lot of investors , esp those are new and eager to  just jump on board.

Too high a gearing ( borrowing )  caused many Singapore REITS in financial problems.

If one does not have the transparency to disclose their  gearing but saying it is using CASH to pay. I would think twice before investing. There is a purpose behind a purpose.

We reserve the right  to be  the doubtful, simply because our hard earned money is involved.

You remind me of the Singapore REIT- Saizen REIT,which default 7.3 billion yen.Interest rate is going up gradually,so the gearing ratio is getting more important in evaluating your choice of REIT, yield and DPU have to take a back seat.

You remind me of the Singapore REIT- Saizen REIT,which default 7.3 billion yen.Interest rate is going up gradually,so the gearing ratio is getting more important in evaluating your choice of REIT, yield and DPU have to take a back seat.

I don like right issue as it will dilute DPU.

i PREFER them the raise their gearing and service the loan instead.

Of course gearing is important so we have to see the ability to service the loan of that particular reits. Thats y have to see their latest debts to equity ratio for UOA . i don dare to comment much as i don have the figure at the moment. DPU and yield take back seat? Ppl buy reits for their yield lol 

As long as the right issue or private placement money is used to acquire properties that deliver at least as same as current yield, it won't dilute the DPU.

Actually I prefer them to raise money through private placement instead of gearing as long as those money being used to acquire properties that higher than current yield (or at least at par),
mainly because interest rate only has one way to go i.e. up only, while with low gearing, it poses lesser risk on the reit itself in term of defaulting or difficulty in refinancing the loan itself, as reit won't repaying the loan, but servicing the loan only, while most loan/borrowing are quite in short to midterm only, which several years down the road, refinancing always needed.

REITS in Malaysia cannot  run away from the problems faced by REITS internationally.

Of course, We are on better footing, but cannot just ignore the problems happened  elsewhere totally.

For private placement, what if the issue price per unit was far below market price? E.g. RM 1.00?
That is my concern on private placement as small investors like us will be on the losing end.

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Added on March 10, 2010, 12:08 pm

You are right as UOA current have 4 properties. With additional 2 properties i believe their gearing will boost up. Have to check their latest debts to equity ratio.

UOA REIT(based on 2009 Annual report ):

Debt to equity ratio:0.42
Gearing ratio:29%