A real estate investment trust backed by Singapore state investor Temasek is betting on demand from yield-hungry investors to complete an up to $1.3 billion initial public offering, the largest ever IPO by a REIT in the city state.
Investors and bankers hope a successful offering by the REIT, Mapletree Greater China Commercial Trust, will be a harbinger for IPOs in Asia following a dismal 2012.
It will be the biggest IPO in Asia excluding Japan since the $3.1 billion listing of People's Insurance Company (Group) of China's (PICC) in late November, and comes ahead of some $2.5 billion of offerings for business trusts and REITs expected to take place in the coming months in Singapore.
"Overall it's quite attractive because of the strong sponsor, quality assets and yield," said Tan Siew Ling, an analyst at CIMB Research in Singapore. "Given the size of the deal, it will be closely watched because if it does well, it will give a positive signal to other players that might want to do similar IPOs."
Mapletree is offering about 1.73 billion units in a range of S$0.88-0.93 each, putting the total deal at up to S$1.6 billion ($1.3 billion), according to a prospectus of the IPO filed on Friday.
At that price range, the REIT has a projected yield of as high as 6 percent for the financial year ending in March 2014, and 6.5 percent in the following year, the prospectus said.
The projected returns compare with an average of 5.05 percent on retail REITs and 4.82 percent for office REITs listed in Singapore for the 12 months through the end of January, according to Asia Pacific Real Estate Association (APREA) data. In Hong Kong, retail REITs posted average yield of 4.6 percent, while office REITs had 5.46 percent in the same period.
"The yield is attractive and in line with what is being offered in the REIT space in Singapore," said Kristy Fong, an investment manager at Aberdeen Asset Management in Singapore. "Right now they have a few assets, but the management can pursue asset enhancement and there are potentially more assets that can be injected by the sponsor."
Pricing of the IPO is set for Feb. 27, with trading on the Singapore stock exchange slated for March 7.
The Mapletree REIT will consist of office and retail developments in mainland China and in Festival Walk, an up-market shopping center in Hong Kong's Kowloon area. It is controlled by Mapletree