Separately, it aborts plans to redevelop Market Street Car Park
By UMA SHANKARI
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CAPITACOMMERCIAL Trust (CCT) has secured refinancing for $580 million of loans due in March 2009.
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| Staying put: Aborting redevelopment of Market Street Car Park because of uncertain market outlook |
DBS Bank, Standard Chartered Bank, United Overseas Bank and The Bank of Tokyo-Mitsubishi UFJ will provide a secured three-year term loan of up to $580 million for CCT.
The trust intends to draw down the loan in March 2009 to refinance the borrowings under its commercial mortgage-backed securities (CMBS).
CCT also said yesterday that it would abort the redevelopment of Market Street Car Park into a Grade A office and commercial building.
The trust said in April last year that the decision on the planned redevelopment would be made only after mid-2009.
But after taking into consideration the uncertain market outlook, tight credit conditions, high redevelopment cost and significant size of the project, CCT's manager has decided to abort the project immediately.
When the redevelopment was first announced in January 2008, CCT said that the total project cost could range from $1 billion to $1.5 billion, depending on the development premium.
Analysts said that it was no surprise that CCT has secured refinancing, as it is backed by property giant CapitaLand.
'The news is definitely very positive for CCT as well as for the Reit (real estate investment trust) sector as a whole,' said DMG & Partners Securities analyst Brandon Lee.
In a note yesterday, Kim Eng Research chose CCT as its top pick in the S-Reit sector.
'We believe that CCT will be able to refinance its debt without much hassle, although inevitably at a higher rate due to the tight credit conditions,' the firm said before CCT announced its refinancing deal.
CCT said that the all-in interest cost for the loan is well within the projections assumed in a circular to unitholders dated June 9, 2008.
The circular assumed an average interest rate of about 4 per cent per year (including margins and excluding the amortisation of debt issuance expenses) for the 2009.
CCT said that the CMBS is secured by seven of its properties. However, the term loan will only be secured by just one property - Capital Tower.
'We believe that the banks' willingness to lend to CCT with security over just one asset, Capital Tower, is an affirmation of their confidence in the quality and value of CCT's portfolio as well as its bluechip tenant base,' said Lynette Leong, chief executive of the trust's manager.
As a result, out of CCT's portfolio of 11 properties, eight properties with a total asset value of $2.8 billion will be free of any encumbrance.
This will provide the trust with financial flexibility in managing its capital and balance sheet, said Ms Leong.
And as for the decision to abort the redevelopment of Market Street Car Park, Ms Leong said that the move was in line with the need to conserve cash, adding: 'This decision provides certainty to our investors in removing any overhang in capital requirement.'
CCT can also now enter into longer-term leases and adopt longer-term plans through repositioning the retail tenant mix, she said.
CCT shares lost 4.5 cents, or 4.6 per cent, to close at 93.5 cents yesterday amid a broad market pullback.
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