TCA.L Regulatory News (TCA)

8 Sep 2008 07:00



Speymill Macau Property Company plc

8 September 2008

Speymill Macau Property Company plc

('Speymill Macau' or 'the Company')

Speymill Macau Acquires Prime Office Building in Macau Central Business District

Speymill Macau Property Company plc (MCAU.L), the Macau focused property investment company listed on AIM, has acquired the Grade-A office building, AIA Tower situated at No. 251A-301, Avenida Comercial De Macau in the Nam Van District in Macau ('AIA Tower' or the 'Property').

The 22-storey office building is located at the heart of the Central Business District close to financial institutions, multinational corporations and world-class hotels such as the Wynn Macau and Grand Lisboa. It has 372,730 sq ft (34,630 sq m) of gross floor area, of which 292,335 sq ft (27,160 sq m) is Grade-A office space and 80,396 sq ft (7,470 sq m) is designated for retail, as well as 186 car parking spaces. The currently contracted occupancy rates for the office and retail space are 93% and 71% respectively.

The Property is currently anchored by office tenants including AIA (an insurance company), VIVA Macau (a local airline), Bank of Communications (a Chinese bank) and various retail tenants, including Starbucks. The average unexpired lease terms for office and retail space are 3.6 years and 3.4 years respectively.

The investment in AIA Tower has been made through the acquisition of 100% of the share capital of a Cayman Island company, Turbo Ventures Ltd, which is the indirect offshore holding company of AIA Tower. The price being paid for the net assets of Turbo Ventures Ltd is HK$ 600 million (US$ 76.9 million), which values the property at HK$ 1,200 million (US$ 153.8 million), representing an initial yield of 4.7% on contracted rental income. The consideration required to acquire the net assets of Turbo Ventures Ltd is being satisfied in full from the Company's existing cash resources. In order to enable the Company to refinance the Property's existing debt a HK$ 600 million (US$ 77 million) debt facility has been secured with Banco Weng Hang on attractive terms. 

The AIA Tower is one of only few Grade-A office buildings in Macau. With no new offices expected to be built in the medium term due to the current planning environment, occupancy in such buildings has risen by 12.5% annually and rents have grown by an average of 17% per annum over the last three years according to Jones Lang LaSalle reports. Overall capital values of Hong Kong Central Grade-A office properties have been over HK$ 16,000 per sq ft, which in comparison with the AIA Tower priced at HK$ 3,219 per sq ft, demonstrates significant upside potential for office investments. Moreover, average Macau prime Grade-A office rents, currently at around HK$ 15 per sq ft per month, compare favourably with Hong Kong prime office rents of HK$ 100 - HK$ 200 per sq ft per month. 

Currently average Macau prime Grade-A office rents per sq ft are about 25% higher than the in-place average per sq ft office rental achieved in the Property. Given a typical 3-year renewal cycle, this offers significant reversionary potential for the Property.

We will continue to actively asset manage the Property in order to unlock further value added potential such as through repositioning and leasing of the commercial areas on the podium areas of the Property.

Commenting on the investment, Larry Kearns, the Company's Chairman, said, "We are very pleased with this acquisition - an investment which we believe provides an opportunity to capture the growth in the office sector in Macau and offers potential for significant rental growth on the back of strong demand for commercial space. By entering the commercial real estate market of Macau, we are continuing with our strategy of providing investors with access to a wide range of property investments in the region."

For further information please visit www.mcau.co.im or contact:

Further information on Turbo Ventures Limited:

For the period 1 January 2008 to 31 July 2008, Turbo Ventures Limited made losses before and after tax (unaudited) of HK$ 2.8 million and HK$ 3.8 million respectively, reflecting the corporate structure in place during the period. Its unaudited net asset value as at 31 July 2008 was HK$ 281.3 million.

Notes to editors:

Speymill Macau Property Company plc ('Speymill Macau' or 'the Company')

Speymill Macau was incorporated and registered in the Isle of Man on 31 October 2006 and is a closed-end investment company registered in the Isle of Man and traded on AIM, a market of the London Stock Exchange.

The Company was established to invest primarily in the Macau property market. This includes pursuing selective commercial property investments to capture expected ancillary Macau service sector growth. The Company listed on AIM on 17 November 2006 raising US$ 80 million in a placing on admission. A second fundraising of US$ 70 million was completed in May 2007. The Company's objective is to provide shareholders with an attractive overall return to be achieved primarily through long-term capital growth. 

Macau is one of only two Special Economic Regions, a semi-autonomous administrative area, in China, and has enjoyed explosive economic growth, in part due to its establishment as an important gambling and tourist destination. These developments have led to high historical and forecast GDP growth, driven by rising incomes and low unemployment levels. Coupled with the limited availability of land, developers are now struggling to meet a stronger than anticipated demand for higher quality housing. These favourable market dynamics are expected to enable Speymill Macau to offer shareholders an attractive overall return.

Speymill Property Group Limited ('SPG') is the Manager of the company and the Investment Adviser is Speymill Property Group (Far East) Limited, a wholly owned subsidiary of SPG.