Ascendas Hospitality Trust has decided not to launch its initial public offering in Singapore due to the challenging market conditions, but will remain flexible about the timing of the deal, sources said yesterday.
The trust was aiming to raise between $600 million and $700 million, and after starting pre-marketing earlier this month had been expected to kick off a formal institutional roadshow early this week, according to sources. Ascendas Hospitality Trust owns hotels in Australia and several Asian markets, including China and Japan.
The company is not launching the deal this week, but it may come back soon, one source said.
Singapore’s FTSE Straits Times Index has dropped 6.8% since May 2 amid persistent worries about the eurozone debt crisis and signs of slowing economic growth in China.
A number of other listing candidates have also struggled in the precarious market environment. Earlier this week, China Yongda Automobiles Services Holdings was forced to cancel its Hong Kong IPO of between $306 million and $435 million after its comps fell sharply, causing investors to abandon the deal.
And within the property sector, M&L Hospitality Trusts (M&L Trusts) last month decided not to proceed with its Singapore IPO due to disappointing demand. M&L Trusts was looking to raise between $339 million and $369 million. It was set to own six hotels in Singapore, Australia and Japan at the time of the listing.
Ascendas Hospitality Trust surprised some observers when it started pre-marketing so soon after M&L withdrew its offering due to a lack of demand, especially since both trusts are focused on hotels. But sources said at the time that the backing of the high-quality Ascendas group, which investors know well, was expected to make a difference. Ascendas Hospitality Trust also doesn’t own any properties in Singapore, which is a market that investors have become increasingly sceptical about.
However, both trusts own cross-border assets, which historically have been a tough sell in Asia — partly because some investors find it difficult to fit them into their portfolios and partly because currency fluctuations make them more difficult to value. Given the currency volatility in recent months, this may have put investors off.
In the first week of May, Ascendas Real Estate Investment Trust (A-Reit), which has the same sponsor as Ascendas Hospitality Trust but focuses on industrial properties, raised S$298.5 million ($241 million) from a follow-on share placement that was priced at an adjusted discount of 4% to the latest close, or at a forward yield of about 7%.
It too was not the kind of blow-out deal that the group has become used to in the past. But being viewed as a “blue-chip” Reit with a top-quality management and a loyal shareholder base that came in to support the transaction, A-Reit got the momentum it needed.
Nomura and Standard Chartered are joint global coordinators for Ascendas Hospitality Trust’s IPO, while DBS and HSBC are joining them as bookrunners.