Singapore property investment trust A-Reit priced its inaugural capital raising of the year on Monday meeting a warm welcome from investors. The S$205 million ($126 million) placement of new units was nearly four times subscribed. And although the deal was said to be covered at the strike price, the lead managers, Citigroup and UBS, decided to price at a 1% discount to the adjusted close, leaving some upside for investors.
Some 75 orders were received, mainly from long only funds, although some hedge funds came into the book early to create some momentum. After a four-hour accelerated book build the deal was closed with 50% going to Singapore, 30% to Europe, 29% to Australia and 1% to the US.
Bankers close to the transaction said the failure of Hong Kong's Link Reit had left investors with quite a bit of residual demand for Asian Reit plays, which this deal was happy to tap into.
Indeed A-Reit still carries a yield of 5.3% despite rising from S$0.88 at its IPO 18 months ago to S$1.91 as of yesterday's close. A-Reit will use the proceeds of its placement to purchase four offices in Singapore, Telepark, Kim Chuan Telecommunications Complex, KA Centre and KA Place.
As more and more Singapore property gets snapped up by the acquisition hungry reits, so they will have to move offshore. Capitaland for one has been busy buying properties in China and Japan. Bankers expect these purchases to necessitate further placements in the equity markets throughout the year.
Moreover, it was announced in Friday's budget, that stamp duty was being reduced and that certain other tax concessions were being made, which will substantially reduce the restructuring costs of forming a reit. Bankers in Singapore are openly talking about some of the larger property conglomerates such as Singapore Land and UOL, now considering reits this year due to this reduction in cost.
Across the causeway in Malaysia, the new rules on reits enacted in December are likely to encourage deals. Up in Hong Kong a certain other deal is waiting in the wings, ready to make a reappearance. Still in Hong Kong, the property conglomerates are also looking to tap into a rising market, with New World Development announcing on Monday a possible HK$6.3 billion ($807 million) rights issue, the largest ever in Hong Kong if it happens. In these uncertain times, the combination of yield and growth is making Asian real estate very attractive to investors.