United Engineers

[greengiraffe]

I had a chance to review the financial engineering that UE engineered at the inception of VIVA REIT. Whether you like UE is besides the point but its certainly a case studies for those who are kay poh:

Selling Price of Bizhub: S$518m
Book value: S$288m

Gains before rental guarantee (business & retail space) to VIVA: S$230m
Less 5 Year rental guarantee (as follows): S$135.3m
Less Others: S$8.0m
Reported Gains to be booked: S$86.7m or EPS: $0.14

Net rental guarantee for year 1 - 2: S$26.0m pa
for year 3 - 4: S$27.3m pa
year 5: S$28.7m

Total over 5 years: $135.3m. This represents deferred income for UE over next 5 years should VIVA achieve the targeted occupancy levels. In fact, if VIVA exceed the guaranteed levels, they will have to refund UE the surplus, ie VIVA unit holders will get S$135.3m over the next 5 years (no more no less).

http://infopub.sgx.com/FileOpen/Viva%20I...ileID=4065

Pg 107 of Viva Prospectus (Dec Year End):

For UE BizHub EAST, the REIT Manager has projected rental arrangement of S$7.5 million for Forecast Period 6 Months 2013, S$13.4 million for Projection Year 2014, and S$13.2 million for Projection Year 2015 for the Business Park Component and Hotel Retail Areas.

Based on the full year projections for FY14 & 15, it appears that UE is off the hook for about 50% of the guarantee support for first 2 years. Hence we can safely assume a write back of at least 50% of $135.3m or S$67.65m in total for next 5 years. Annually that is about $13m or EPS $0.021.

In connections to the setting up of Viva REIT, UED has also subscribed for a 10% stake in each of Viva Industrial Trust Management Pte. Ltd. (“VITM”), being the manager of the REIT.

UED has the option of selling the 10% stake in VITM and the holding co of VITM after 12 months but before 36 months post the listing of Viva REIT. The costs of the stakes totalled $0.8m while the sale price at $4.0m, representing a gain of $3.2m or 400% net.

As for the hotel at the Bizhub, UE will pay a flat annual rental of $8.66m for full opeartions for the first 5 years.

Vested
GG

http://infopub.sgx.com/FileOpen/Ann_Dive...eID=246866

2. UED has also subscribed for a 10% stake in each of Viva Industrial Trust Management Pte. Ltd. (“VITM”), being the manager of the REIT.

3. UE has also taken up 5% or 29.7 mil share of the Viva REIT @ 78 cents per share. The total amount invested in the REIT was S$23.16 mil

4. The investment in REIT and REIT's manager is funded by internal resource and will not have any impact on the NTA and EPS.


http://infopub.sgx.com/FileOpen/Divestme...eID=262517

Vested
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