REIT Listings Heat Up Singapore IPO Market

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 recovery.

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 shares.

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 week.

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