Published October 29, 2008

YTL snaps up interest in Macquarie Reit for $285m

Price is 52% above its last traded price, but 49% discount to net asset value

By CHEW XIANG
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(SINGAPORE) Malaysian conglomerate YTL Corp yesterday took over the Macquarie Group's entire interest in Singapore-listed Macquarie Prime Reit in an all-cash deal worth $285 million.

YTL said it was paying 82 cents a unit for 247.1 million units in the Reit, about 26 per cent of the total, valuing the stake at $202.6 million.

The price is a 49 per cent discount to Macquarie Prime Reit's net asset value, and a 52 per cent premium over its last traded price on Friday of 54 cents. Trading in Macquarie Prime was halted yesterday for the announcement.

The remaining $80 million is for Macquarie's 50 per cent stake in the Reit manager, which will allow YTL to control the Reit, YTL Group managing director Francis Yeoh told reporters here yesterday.

Noting that the deal provides a 2009 yield of about 9.4 per cent, based on Bloomberg consensus estimates, Mr Yeoh said it offers 'very compelling returns in Singapore dollar terms' and illustrates his optimism about the Singapore property space.

The Reit currently owns $2.2 billion of retail and office properties in Singapore, Japan and China. It has stakes in Wisma Atria and Ngee Ann City along Orchard Road.



YTL is separately developing two luxury villas on Sentosa Island and last year bought the prime Westwood Apartments site at Orchard Boulevard for $435 million.

'I'm very confident Singapore will pull through this little turbulence... Even if they have a crisis they will always come out ahead of the curve,' he said. Mr Yeoh will be appointed the Reit manager's executive chairman once the deal is completed.

Mr Yeoh said Macquarie Prime will be rebranded Starhill Global Reit and will be YTL's main vehicle for strategically acquiring yield accretive prime retail space in Asia and the West. He added he will be working with principals in the fashion, food and watch and jewellery industries to boost yields in its luxury malls.

Keith Magnus, Merrill Lynch's head for Singapore and Malaysia investment banking and YTL's strategic adviser for the transaction, said: 'Challenging equity and debt conditions on account of the sub-prime crisis and tightening credit market conditions have led to attractive valuations.'

In February this year, Macquarie Prime, then known as Macquarie MEAG Prime Reit, said it was undergoing strategic review that could see the Macquarie Group selling its stake in the Reit. It is said to have received more than 20 expressions of interest from unnamed parties.

In May, MEAG Munich Ergo AssetManagement sold its 25 per cent stake in the Reit's manager to Singapore-based fund management company Pacific Star. The deal left Pacific Star and the Macquarie Group each with an equal share of the Reit manager. Macquarie's 50 per cent stake has now been bought by YTL.

The YTL Group already controls Bursa Malaysia-listed Starhill Reit, the country's largest Reit with four properties in Kuala Lumpur valued at about US$430 million. Mr Yeoh did not rule out any merger of the two Starhill Reits, saying that 'as long as there is equitable interest for all, we will do it.'