Bankers on Friday started pre-marketing of Far East Reit, a hotel-focused real estate investment trust that is aiming to raise about S$700 million ($557 million) from an initial public offering in Singapore.
The trust is sponsored by Far East Organisation, which is owned by the Ng family and is the biggest private property developer in Singapore. The same family also owns the Hong Kong-based Sino Group.
According to the current timetable, the pre-marketing is expected to continue until August 3. The institutional roadshow will run from August 6 to 15 and the listing is scheduled for August 27.
At the time of listing, Far East Reit will have a portfolio of seven hotels and four serviced residences in Singapore, a source said. This contrasts with Ascendas Hospitality Trust, which completed a S$459.3 million ($364 million) IPO in Singapore just last week. Ascendas Hospitality’s initial portfolio comprises 10 hotels, which are located across six cities in Australia, China and Japan. The trust also planned to acquire a South Korean hotel, but that acquisition was dropped at the last minute.
If successful, Far East Reit’s offering will be the biggest IPO in Singapore so far this year, according to Bloomberg data. The recent offerings are an encouraging sign for the region, after the equity capital markets volume in Southeast Asia fell 5% in the first half of 2012 from the same period last year to $11.1 billion, according to Dealogic. The volume was boosted by Felda Global Ventures’ $3.1 billion IPO in June, which was the largest listing in Asia-Pacific this year and the third largest Malaysian IPO on record.
So far, there has been quite a bit of interest from potential cornerstone investors, another source said. However, most of the deal terms, including the potential yield, are still under discussion.
As a reference, Ascendas Hospitality priced its IPO at a distribution yield of 7.9% for the fiscal year to March 2013. Also, CDL Hospitality Trust, a cross-border hotel Reit listed in Singapore, is trading at a yield of 6.1% for 2013, while Ascott Residence Trust, a Singapore-listed Reit focusing on serviced apartments, has a yield of about 7.6% for 2013, Bloomberg data show.
Far East Organisation owns and operates the largest corporate leasing and hospitality portfolio in Singapore, including eight hotels and 11 serviced residences with more than 1,200 apartments, according to its website. It has two listed subsidiaries — Orchard Parade Holdings, a hotel and property group, and Yeo Hiap Seng, a home-grown food and beverage company.
Since its establishment in 1960, Far East Organisation has developed more than 700 real estate projects in the residential, hospitality, commercial, and industrial sectors in Singapore. It is responsible for one in five (42,000) of all private homes in Singapore, it says.
Singapore’s Straits Times Index has gained about 12% since its low in June when global markets tumbled on worries about the eurozone debt crisis. It is up 14% so far this year.
DBS, Goldman Sachs and HSBC are joint global coordinators and bookrunners for the deal.
