MalaysiaÆs YTL Corp buys control of Singapore Reit

The Malaysian developer pays $189 million for 26% of Macquarie Prime Reit and 50% of its management company, in the largest Singapore Reit M&A deal to date.
YTL Corp, a Malaysian investment holding and management company, last night announced that it will acquire a 26% stake in Macquarie Prime Reit (MP Reit) and 50% of Prime Reit Management Holdings (PRMH) from Macquarie for S$285 million ($189 million).

Singapore-listed MP Reit started out with a portfolio comprising two major properties on Singapore's Orchard Road û Wisma Atria and Ngee Ann City. It expanded in 2007 with the acquisition of seven properties in Tokyo and now also has one property in Chengdu in China. The real estate investment trust has a market capitalisation of S$516 million and the 10 properties in its portfolio are valued at around S$2.2 billion.

The 26% holding will make YTL Corp the largest unitholder in MP Reit. This stake, combined with the acquisition of 50% in PRMH, will give YTL Corp control of the Reit.

PRMH is the holding company of Macquarie Pacific Star Prime Reit Management, the day-to-day manager of MP Reit, and of Macquarie Pacific Star Property Management, which is the property manager of MP Reit's Singapore properties.

YTL Corp is paying S$202 million for its stake in MP Reit. It has agreed to purchase 247 million units at S$0.82 a share, a premium of 52% to its last traded price on the Singapore Exchange (SGX), and a 49% discount to its net asset value. Based on the acquisition price, the estimated dividend yield for 2009 is approximately 9.4%.

"This historic transaction is the largest Singapore Reit M&A deal to date and provides YTL Corp with a key vehicle for its regional and global growth ambitions in the Reit space,ö says Keith Magnus, head of Singapore and Malaysia investment banking at Merrill Lynch, who advised YTL Corp on the deal. ôIt is also a strong endorsement of the intrinsic value of Singapore's real estate sector."

The sale fits in with a tentative M&A trend in the Singapore Reit market. In July, Frasers Centrepoint Limited bought 100% of the manager of Singapore-listed Allco Commercial Reit, as well as its 17.7% stake in the Reit itself, for S$180 million ($132 million), in a deal that represented the first effective change of control for a Singapore Reit. And in February real estate-focused private investment firm Oxley Group acquired an effective 20% stake in the company that manages Cambridge Industrial Trust.

The MP Reit deal is contingent on the approval of YTL Corp's shareholders, Bank Negara Malaysia, the SGX and the Monetary Authority of Singapore. Once the deal is approved, YTL intends to change its name from MP Reit to Starhill Global Reit.

With a market capitalisation, through its five listed vehicles, of about M$22 billion ($6 billion), YTL Corp is one of the largest companies in Malaysia. Its core activities include infrastructure management in areas such as power generation and water and sewage facilities, as well as cement manufacturing and the development of properties and hotels. Through one of its subsidiaries, it owns Malaysia's largest Reit, Starhill Reit, which has a market capitalisation of around $260 million and a property portfolio valued at $433 million.

Francis Yeoh, YTL Corp's managing director, said in a statement that the acquisition will help globalise the Starhill brand.
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