REIT Listings Heat Up Singapore IPO Market
Companies are again rushing to list real estate and other assets on
Singapore’s stock exchange, with billions of dollars in recent and
planned deals putting the city-state on track for its best-ever year for
initial public offerings.
They are listing in the form of trusts, which investors find
attractive because they pay high returns and assured dividends. The new
push follows a market selloff in May and June that hammered trusts’
share prices and led two companies to delay offerings.
In the past two weeks, two real-estate investment trusts raised a
total of US$900 million in Singapore IPOs. Another US$4 billion of trust
deals are in the pipeline as companies ranging from department-store
operators to wind-power providers look to capitalize on the market’s
Last week, Singapore-listed property developer Overseas Union
Enterprises, controlled by Indonesia’s Riady family, listed hotel and
shopping-mall assets in a REIT after raising US$476 million in an IPO.
And Singapore Press Holdings Pte. Ltd.
the city-state’s largest publishing company, listed a REIT of its
shopping malls after raising US$438 million. Demand for both offerings,
from institutional and retail investors, easily exceeded the supply of
Other companies are following suit. Among them, Lotte Department
Store, South Korea’s largest department-store operator by revenue, plans
to list some of its shopping-mall assets in Singapore in a deal that
could raise US$1 billion, people with knowledge of the deal said last
Lotte on Wednesday confirmed its IPO plan but said it hadn’t decided on the timing.
MBK Partners, an Asia-focused private-equity firm that controls
Taiwan’s largest cable-television operator, China Network Systems, will
also seek to raise around US$1 billion by listing the operator as a
business trust, people with knowledge of the deal said last week.
MBK declined to comment Wednesday.
Singapore-listed property developer Soilbuild Construction Group
Ltd., meanwhile, has started taking orders from institutional investors
for a US$505 million IPO of industrial properties, people with knowledge
of the deal said. The company filed an IPO prospectus with Singapore’s
central bank on Tuesday.
The success of last week’s listings—shares in both traded above their
IPO price on Wednesday—indicates that many investors still see REITs as
attractive despite concerns about U.S. monetary stimulus potentially
being scaled back and about higher interest rates, which were largely
behind the selloff in May and June.
REITs were the biggest losers on the Singapore market during that
period, falling 15% from May 20 through July 4 and underperforming the
benchmark Straits Times Index, Citibank said in a report.
But despite higher yields on Singapore government bonds, the gap
between them and yields on Singapore-listed REITs remains “quite
comfortable and attractive,” said Eric Khaw, Singapore-based associate
fund manager for Henderson Global Investors, which has more than US$100
billion under management.
“We are not that concerned about short-term interest rates moving up in the short to medium term,” Khaw said.
Henderson was a cornerstone investor in Mapletree Greater China
Commercial Trust, which raised US$1.3 billion in an IPO of China
real-estate assets in March. Cornerstone investors generally commit to
holding a significant stake for a set period.
Singapore has become an Asian hub for trust listings, due largely to
government rules that require trusts to pay out 90% of revenue in
dividends. Singapore-listed REITs have yields of 6%-7%.
The city-state ranks first in Asia this year in trust IPOs with a
total volume of US$3.4 billion, nearly half the region’s total,
according to data provider Dealogic.
That dominance in trust listings, which has accounted for 90% of the
city-state’s total IPO volume this year, has pushed Singapore to first
in overall IPO volume in Southeast Asia for the year—and third in Asia
behind only Tokyo and Hong Kong, according to Dealogic.
If all the deals in the pipeline get done, Singapore is likely to
surpass its previous record for IPO volume of US$7.2 billion in 2011.
“There is ample liquidity in the region and property is a good way to
play on the growth in Asian economies,” said Angelo Scasserra, head of
real-estate banking for Southeast Asia at Credit Suisse, an adviser on
both the Overseas Union and Singapore Press Holdings offerings.
Scasserra said both offerings saw significant demand from private-banking clients.
“Unlike an institutional investor, a private-banking client doesn’t
have to manage redemptions from fund investors and they don’t have to
outperform indices, so they can be long-term holders of real-estate
securities,” he said.
Source: The Wall Street Journal