REIT listings in limbo as Singapore marrket cools
Planned Singapore listings of real estate investment trusts, spun off by Indian developers, are being thwarted by the U.S. subprime crisis,
By Agencies |
SINGAPORE:They should be perfect for choppy markets -- low volatility securities in amature stock market, based on assets in a fast growing Indian economy that manybelieve will weather the global storm.
But planned Singapore listingsof real estate investment trusts, spun off by Indian developers, are beingthwarted by the U.S. subprime crisis, which has rocked stock markets and raiseddoubts about property investment, wherever it is. DLF Ltd , India's mostvaluable property firm, Unitech and Indiabulls Real Estate have been talking toinvestment banks about listing REITs in Singapore, possibly as early as thefirst quarter.
ButAustralian-backed MacarthurCook Industrial REIT last week became the latest todelay a deal when it shelved a S$200 million (US$290 million) secondary offeringin a Singapore market that has fallen by a fifth this year.
One banker, who asked not tobe named, said his team has been advising Indian issuers to hold off onSingapore issuance plans because of volatile markets. "The market is crap rightnow. I wouldn't advise anyone to come and list now," the investment banker said.Indian developers are keen to raise funds for expansion by selling buildingsinto property trusts, in which they would retain a controlling stake. The trustsshould then become willing buyers of buildings as the developers roll out newprojects.
The Indians havebeen watching the success of Singapore's REIT market, which has grown to almost$19 billion. India does not yet allow the securities, although regulators issueddraft REIT guidelines last month and analysts expect next month's budget to givesome indication of when India will get its own REIT market. DLF is looking toraise $1.5 billion and has picked Goldman Sachs and Lehman Brothers bankers havesaid. Unitech wanted around $600 million from listing an office trust and hasmandated Deutsche Bank , JPMorgan UBS and Morgan Stanley as book-runners, twopeople involved in the deal told Reuters.
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The two had been looking tolaunch early 2008 IPOs, banking sources said, but the cost of equity has jumpedas much as 30 percent for some Singapore-listed REITs since July, said MarkEbbinghaus, head of Asian real estate investment banking at UBS. "Where we areat present, clearly the cost of equity for a number of REITs is under pressure,largely because of the flow of capital leaving Asia," Ebbinghaus told Reuters.But deals could be pushedthrough because of the scarcity value of Indian property accessible to foreigninvestors. "As long as the pricing is acceptable, we would see a variety ofvehicles having some support levels in the Singapore business trustenvironment," Ebbinghaus said.
"But the timing remainsuncertain." REITs, which pay most of their rent as dividends, have caught onacross Asia in the last five years, with investors liking the bond-like steadyincome with the prospect of growth if rents and property values rise. Butalthough REITs are usually regarded as defensive plays, trusts across the worldsuffered in the second half of last year, as the U.S. subprime crisis unfoldedand hit commercial property markets in the United States and Europe.
The only Indian REIT,Singapore-listed Ascendas India Trust , traded on Wednesday at S$1.06, wellbelow its IPO price of S$1.18. Singapore's REIT index has fallen 21 percentsince the start of the year through Monday, in line with a 20 percent slide bythe benchmark Straits Times Index.
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REITs dropped 20 percent inthe second half of last year. "If you look at the performance of Ascendas IndiaTrust, the share price has fallen back to (below) the IPO price," said DavidLum, analyst at Daiwa Institute of Research. "So, even for a strong growth storylike India, IPOs will still have to hold back a bit before they can convinceinvestors to come in." Becauseof the market downturn, at least $800 million worth of IPOs in Singapore andseveral million dollars worth of secondary share offerings were delayed inOctober-December. The gloom in Singapore contrasts with a more robustfund-raising environment in India, where Dubai's Emaar Properties
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