Ascendas India Trust prices at top of range

The Reit-like vehicle backed by Indian assets raises a total of $331 million with an implied yield of 4.75%.
Singapore-based Ascendas India Trust confirmed yesterday that it has priced its Reit-like vehicle at the top of the range, allowing it to raise a minimum of S$500 million ($331 million).

The final price of S$1.18 implies an annualised yield of 4.75% for the current fiscal year to March 2008. The offering comprised about 423.38 million units, which account for just over 56% of the trust. This will increase to 62% if the 10% greenshoe is fully exercised, however. If so, the deal will end up raising S$550 million ($364 million).

The units were initially marketed in a yield range between 4.75% and 5.22%. JPMorgan is the sole financial adviser to the trust as well as joint bookrunner together with Citi and DBS.

The offering, which is the first Reit-like vehicle backed by Indian assets, received orders for 47 times the amount of units available from more than 200 institutional investors even though the books were closed a day early to prevent orders from getting too inflated, sources say. That level of demand makes this the most popular Reit or Reit-like IPO in Singapore after CapitaRetail China TrustÆs $141 million offering in November last year that was more than 100 times covered.

It is interesting to note that it is the vehicles that are backed by assets in the high-growth markets of China and India that are attracting the most interest, while Reits were initially meant to be a relatively conservative asset class that would provide a steady yield with some additional growth on top.

They have come long way since then, however, and investors buying into these vehicles are now willing to take a lot more development risk. Ascendas India Trust, or a-iTrust as it is to be known, is a prime example of that as it is structured much more as a growth vehicle than any of the Reits in the market.

In fact, the newcomer cannot call itself a Reit because 20% of its portfolio consists of land or projects under development, while the maximum portion allowed in a Reit is 10%. As a result, the vehicle is brought to market as a business trust. However, it is generally structured as a Reit, including asset class specific features such as a commitment to pay out 100% of its distributable income in the first two fiscal years to March 2009 and at least 90% thereafter, and a gearing limit of 35%.

ôAll of this growth is built into the trust and you are getting it from day one when you buy the IPO. It is not a first right of refusal that says we might sell you something in the future, if you can afford to pay for it and we want to sell it û they already own it,ö one observer says.

ôThat feature made it attractive to investors as they felt the growth is very real and very tangible,ö he adds.

However, the trust also has a right of first refusal for any suitable real estate projects developed either by its sponsor, which is a wholly owned unit of Singapore government-linked Ascendas Pte, or by Ascendas India Development Trust, which is a private real estate fund focusing on mixed and multi-use integrated development projects in high growth sectors in India.

a-iTrust will be focusing on income-producing real estate that is used primarily as business space within information technology parks and other outsourcing hubs in India. The initial four properties in the portfolio are located in Bangalore, Hyderabad and Chennai, which are viewed as attractive destinations for IT and IT enabled services companies. It also holds a pipeline of 1.5 million square feet of proposed developments at the time of listing as well as 24 acres of land that is available for developments, which gives it a much more aggressive growth profile than other Singapore-listed real estate investment trusts.

The demand came from a broad range of high quality investors, including property specialists, India-specialists, long-only asset managers and private banking clients. In particular, it attracted international investors who are not able to buy property stocks directly in the Indian market because of various restrictions. This gave the offering something of a scarcity value that exceeds the fact that it is the first Singapore ôReitö to be backed by Indian assets.

This led to some quite chunky orders, and a few investors even submitted orders that covered the entire deal, one source notes.

According to the listing document, its property income is expected to grow by 18% from S$105.3 million in fiscal 2008 to S$124.3 million in fiscal 2009. The dividend per unit is forecast to increase by 22% from S$0.056 per unit in fiscal 2008 to S$0.0685 in fiscal 2009, based on the maximum offering price.

ôTo have a Singapore government entity put a growth rate of 22% in the prospectus - which implies a 27% total return û is rare and a pretty powerful statement,ö the observer notes. ôNormally people are quite conservative about what they put in the prospectus.ö

The projected growth is expected to be driven by IndiaÆs rapid economic growth that is expected to reach 10% in the current fiscal year and range from 7% to 9% in the coming few years. The business process outsourcing and IT sectors are currently among the highest growth sectors in the country and have a high demand for business space.

Ascendas Pte, which will own about 17% of the a-iTrust at the time of listing, is viewed as one of AsiaÆs leading providers of business space, covering high-tech, science, business and industrial parks as well as customised developments for a number of industries. The company has more than 14 years of experience of property development and management in India and has established relationships with both local and state governments in the South Asian nation. It is also the sponsor and manager of SingaporeÆs first business Reit û Ascendas Reit (or a-Reit as it is perhaps better known) - which listed as far back as 2002.

The remainder of the units will be held by four original investors who owned part of the initial four properties in the portfolio through their investment in the private fund that has now been transformed into the a-iTrust business trust. Part of the proceeds from the IPO will be used to redeem units from these investors to enable them to reduce their stakes. The initial investors are General Electric Capital, The Great Eastern Life Assurance, Lianhe Investments and Forum Asian Realty Income.

The units are due to start trading on August 1 at 2pm Singapore time after completing the retail portion of the offering as well. About 7.4% of the units have been set aside for retail investors and company directors, executives and employees combined.
¬ Haymarket Media Limited. All rights reserved.
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