July 4, 2007

CapitaLand, Lippo to sell condo-backed bonds

Developers raising $522m through the conversion of future homebuyers' payments

By Fiona Chan, Property Reporter

FASTER CASH FLOW: CapitaLand and Lippo are securitising the future payments homeowners will make for the Metropolitan (above) and Scotts HighPark condos. Most units in the projects were sold under deferred payment schemes and the deal brings forward the cash flows due to the developers. -- PHOTOS: CAPITALAND

DEVELOPERS CapitaLand and Lippo Group are selling US$342 million (S$522.2 million) worth of bonds backed by two residential projects.

They are securitising the future payments homebuyers will make for the Metropolitan and Scotts HighPark condominiums, which the developers said have both been sold out.

The deal was announced yesterday by South Africa's Standard Bank, which is handling the bond sale.

The Metropolitan in Alexandra Road is being jointly developed by CapitaLand and Lippo Group in a 50:50 venture, while Scotts HighPark in Scotts Road is a CapitaLand project.

Most of the units in these two projects are believed to have been offloaded under deferred payment schemes.

What the securitisation does is to bring forward the cash flows due to the developers from these deferred sale payments, thereby freeing up capital for them to redeploy.

In return, CapitaLand and Lippo will assign the receivables to Vesta Investment Corporation, a special purpose vehicle set up for this deal.

Vesta will then issue bonds backed by these receivables to investors.

The floating-rate bonds mature in October 2011, by which time both condos will have been completed and all the payments made in full by the homebuyers.

Although the rates have yet to be finalised, both Moody's Investors Service and Fitch Ratings have provisionally assigned top ratings to the bonds.

In giving its rating, Moody's said it considered the track record of CapitaLand and Lippo in 'developing similar residential projects in Singapore on time and within budget' as well as 'the market dynamics for Singapore's residential properties'.

Private home prices in Singapore jumped 7.9 per cent in the second quarter on the back of good economic growth and strong market sentiment.

Standard Bank, Africa's largest lender by assets, said the deal will be launched after an investor roadshow in Asia and Europe, which is expected to take place early this month.

This deal 'is part of CapitaLand's ongoing strategy to make its capital more efficient and productive', the developer said in a statement yesterday.

This is the fifth time CapitaLand has advanced cash flows by securitising condos.

In March last year, CapitaLand raised US$332.7 million from the securitisation of Citylights in Jellicoe Road and Varsity Park Condominium in West Coast Road.

Earlier deals were done in 2001, 2002 and 2004. These four alone add up to more than $1 billion of issuance.

Other developers, such as Keppel Land and Centrepoint Properties (now Frasers Centrepoint), have also previously securitised payments from their condos under development.

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