Far East REIT bets on yield demand with $560 million Singapore IPO
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)
- Tweet this
- Share this
- Digg this
- U.S. Army base in Texas on lockdown after suspicious vehicle found
- India approves $2.6 bln mounted gun purchase - official
- Asia stocks jump as China, Europe step up stimulus
- Iran, powers eye extension of nuclear talks with deadline hours away
- Suicide bomber kills 45 at volleyball match in Afghanistan
The BSE Sensex and Nifty surged to record highs on Monday, tracking Asian peers which jumped on the prospect of further policy stimulus in China and Europe. Full Article
Exclusive - China ready to cut rates again on fears of deflation - sources Full Article