Far East REIT bets on yield demand with $560 million Singapore IPO

HONG KONG Fri Jul 20, 2012 1:20pm IST

Stocks

   

HONG KONG (Reuters) - Far East REIT, a hospitality trust launched by Singapore's largest privately owned property developer, started pre-marketing on Friday an up to S$700 million ($558 million) IPO, betting on demand from yield-hungry investors burnt by volatile global markets.

With interest rates around the world hovering near record-lows, the fixed return on real estate investment trusts are helping lure investors amid an uncertain outlook for equities. The MSCI World Index .MIWD00000PUS has fallen nearly 7 percent since its March peak because of concerns over Europe's debt crisis and China's economic slowdown.

The REIT, which owns hotels and serviced residences in Singapore, is being marketed at a yield of 6-6.5 percent, said a source with knowledge of the deal who was not authorized to speak publicly on the matter. The yield is slightly below the 6.63 percent average for all REITs listed in Singapore.

The IPO is set to be the biggest in the city-state so far this year.

"It's still a relatively risk-averse environment so REITs are something that people are looking at because they give good yields," said Wee Liat Lee, head of property research at BNP Paribas Securities (Asia) in Hong Kong.

"Sentiment has been pretty sizably affected by the slowdown in China recently, so the interest is diverted to Southeast Asia and Singapore as a capital-raising platform."

The yield for the Far East REIT compares with about 7.9 percent offered for Ascendas Hospitality Trust's deal this week and 6 percent for CDL Hospitality Trust (CDLT.SI).

By comparison, so-called specialized REITs that also bundle hotel properties traded at an average 6.6 percent yield in Singapore, 6.7 percent in Hong Kong and 7.4 percent in Malaysia, according to Asia Pacific Real Estate Association (APREA) data.

The REIT, sponsored by Far East Organization, comprises seven hotels and four serviced residences in Singapore with about 2,500 rooms, the source added.

SINGAPORE STOCK ISSUANCE SLUMPS

The deal will come on the heels of Ascendas Hospitality Trust's $304 million offering, which had to be relaunched this week after the company was forced to remove one of the hotels from its portfolio.

It will be a welcome development for equity capital markets in Singapore, where issuance plunged 74 percent to $4.7 billion in the first half of the year from the same period of 2011. The slump was much steeper than the 30 percent decline in stock sales in Asia ex-Japan, according to Thomson Reuters data.

Far East REIT and its bankers will start taking orders for the IPO on August 6, with pricing slated for August 15. The REIT is set to debut on the Singapore stock exchange on August 27.

About half of the orders for the offering are expected to be covered by cornerstone investors, the source added.

DBS Group (DBSM.SI), Goldman Sachs (GS.N) and HSBC (HSBA.L) were hired as joint global coordinators and joint bookrunners on the deal.

($1 = 1.2541 Singapore dollars)

(Editing by Muralikumar Anantharaman)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Public Health

REUTERS SHOWCASE

Cost Cutting

Cost Cutting

PM Narendra Modi boots officials out of the first class cabin  Full Article 

Airtel Profit Jumps

Airtel Profit Jumps

Bharti Q2 net profit more than doubles   Full Article 

Leisure Riding

Leisure Riding

Harley-Davidson woos affluent young Indians with bike culture  Full Article 

Maruti Earnings

Maruti Earnings

Maruti Suzuki net profit up 29 percent, beats estimates.  Full Article 

ICICI Results

ICICI Results

ICICI Bank Q2 profit up 15 percent, beats estimates.  Full Article 

Moody's on India

Moody's on India

Moody's welcomes India's policy steps, but wants to see more.  Full Article 

End Of QE

End Of QE

U.S. Fed ends bond buying, exhibits confidence in U.S. recovery.  Full Article 

Cook Comes Out

Cook Comes Out

Apple's Cook: "I'm proud to be gay"  Full Article 

Refining Margins

Refining Margins

BPCL aims to double refining margins with refinery expansion.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage