CapitaLand aims to revive property trust IPO

CapitaLand is attempting to revive the botched IPO of its retail property trust, SingMall Property Trust (SPT).
Southeast Asia's largest listed property group, CapitaLand is attempting to revive the botched initial public offering (IPO) of its retail property trust, SingMall Property Trust (SPT). CapitaLand has changed the name of SPT to CapitaMall Trust and appointed DBS Bank as the lead manager for its proposed IPO. The IPO is subject to regulatory approvals and favourable market conditions and is expected, according to some observers, to be launched in the second half of the year.

SPT is a retail-property trust formed along the lines of real estate investment trusts (REITS) in the United States and listed property trusts (LPT) in Australia. SPT had tried to become Singapore's first listed property trust when it launched an IPO in November 2001 to raise S$740m. The IPO -Singapore's biggest since 1993 when Singapore Telecommunications (SingTel) listed on the Singapore Exchange (SGX) - was aimed at improving CapitaLand's return on equity as it would have been able to realise its book value for its properties and create a new fee-based business derived from third-party property management fees. The IPO was shelved following lukewarm response from investors.

UBS Warburg and DBS, acting as managers to the sale then, could only book orders for S$410 million, or 78% of the S$530 million offered to investors. CapitaLand was to buy an additional S$210 million worth of shares. Poor market conditions, the slump in real estate prices and low dividends offered by SPT contributed to failure of the IPO. SPT had proposed to pay dividend yields 5.75% for 2002 and 6.05% in 2003 and distribute all of its taxable income on a half-yearly basis starting June 2002. SPT was to initially acquire a portfolio of three major shopping malls -Junction 8, Tampines Mall and Funan The IT Mall - for a total price of S$895 million. In August last year CapitaLand agreed to buy Junction 8 and Funan The IT Mall from its serviced residence subsidiary Ascott Ltd.

CapitaLand, in January this year, constituted a supervisory team to review the structure for the proposed listing of SPT. Goldman Sachs advised CapitaLand on the restructuring of the trust. Observers believe that Goldman Sachs will manage the IPO to institutional clients, while DBS Bank will manage the retail sale.

According to some analysts, the IPO should be successful if dividend yields offered are around 6.5%-7.5%. At this rate, CapitaLand's shareholders are also likely to view the deal favourably. CapitaLand has for some time intended to shed non-core assets and is looking to raise between S$500 million and S$1 billion this year from asset disposals. CapitaLand reported net profits of S$32.3 million in the first quarter of 2002, despite turnover being down 5.28% at S$707.5 million as compared with the preceding quarter's S$747 million. CapitaLand incurred a net loss of S$89.1 million in the quarter ended December 2001. 

Moreover, a successful listing would also herald offerings from other property trust aspiring to list on SGX. Keppel Land, the property arm of Keppel Corporation, abandoned plans to launch a listed property trust in the first half of 2002 following CapitaLand's cancellation of SPT's IPO. Another property trust hoping to list on SGX is Industrial Property Trust managed by Ascendas, a Singpaore-based company, which provides business space solutions including the development, management and marketing of science parks, business, high-tech and industrial parks in key markets in Asia.