MP Reit raises rent by 19.75% at Ngee Ann City

Source : Business Times - 17 Jun 2008

MACQUARIE Prime Real Estate Investment Trust (MP Reit) said yesterday that it has raised rent by 19.75 per cent for about 226,000 square feet of retail space in Ngee Ann City.

The Orchard Road space, of which Toshin Development is master lessee, is occupied by luxury retailers such as Louis Vuitton and Chanel, as well as brand name retailers.

MP Reit - formerly known as Macquarie MEAG Prime Reit (MMP Reit) - said that this is expected to push annualised DPU (distribution per unit) up by 7.2 per cent, based on an annualised DPU of 7.08 cents for the first quarter of 2008.

The rental increase for a period of three years starting on June 8 came after a review with Toshin, which is wholly owned by departmental store operator Takashimaya.

‘The announcement is above our estimates of 15 per cent and is largely positive for the Reit given its positive impact on earnings,’ DBS Vickers said in a research note.

The broking house raised its DPU estimates to 7.54 cents for the financial year 2008, translating to a DPU yield of about 6.7 per cent based on yesterday’s closing price of $1.13.

DBS Vickers also upped its DPU estimates for financial year 2009 to 7.81 cents.

The lease under Toshin contributed to a quarter of the Reit’s portfolio gross rent, as at end-March this year.

But the broking house lowered its target price to $1.61 from $1.63 to account for ‘a higher risk-free rate of 3.9 per cent against (its) previous estimate of 3 per cent’.

MP Reit holds a 27.23 per cent strata title interest in Ngee Ann City, comprising 256,000 sq ft in retail net lettable area and 141,000 sq ft in office net lettable space.

The 30,000 square feet of retail area that is not covered by the Toshin master lease is directly rented out and managed by the Reit.

MP Reit’s portfolio consists of 10 properties that are worth more than $2 billion.