Cambridge Industrial Trust has entered a $100 million unsecured loan facility with HSBC. The loan consists of a $25 million term loan facility and a S$75 million revolving loan facility. Usually when a REIT takes up a loan, there will be a few questions in my mind.
- Did the REIT run into debt?
- Is the REIT expanding or acquiring new property?
Why did Cambridge Industrial Trust take up a loan?
The term loan of S$25 million will be used to refinance the existing facility granted by National Australia Bank Limited. The S$75 million revolving loan will be used to finance Cambridge Industrial Trust working capital.
Let us look at the debt maturity profile based on 1H2016 results. We can see that S$72 million debt is due in 2017. Most probably, Cambridge Industrial Trust is starting to refinance the loan that is due soon in 2017.
What is Term Loan?
A term loan is a loan from a bank for a specific amount that has a specified repayment schedule and a fixed or floating interest rate. – Investopedia
What is Revolving Loan?
A revolving loan facility is a financial institution that lets the borrower obtain a business or personal loan where the borrower has the flexibility to drawdown, repay and redraw loans advanced to it. This type of loan is considered a flexible financing tool due to its repayment and reborrowing flexibility. It is not considered a term loan because, during this allotted period of time, the facility allows the borrower to repay or take the loan out again. – Investopedia
Cambridge Industrial Trust Structure
At the time Cambridge Industrial Trust made announcement about the loan, National Australia Bank is considering a sale, of its majority stake in the manager of Singapore-listed Cambridge Industrial Trust.
According to the trust structure, National Australia Bank holds a 56 percent stake.
The Impact if National Australia Bank Group Sells Its Stake?
As National Australia Bank Group is a major stakeholder, it will mean a change of management for Cambridge Industrial Trust. The future can be positive or negative depending on its future manager. At the moment, Cambridge Industrial Trust is focused on industrial properties in Singapore. The new manager may unlock new value for shareholders by investing in oversea properties as well. However, this is just my personal speculation.