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Li Ka-Shing-Linked Dynasty REIT Launches S$956 Million Singapore Yuan IPO

A Singaporean real-estate investment trust backed by Hong Kong billionaire Li Ka-shing plans to raise up to 956 million Singapore dollars (US$777 million) through a yuan-denominated initial public offering, in the city-state's first flotation to be sold in the Chinese currency.

The IPO of Dynasty REIT, which is sponsored by real-estate fund manager ARA Asset Management Ltd. (D1R.SG), would be the second flotation denominated in the Chinese currency outside mainland China. Mr. Li, Asia's richest man, and Singapore-listed ARA were also involved in the first offshore yuan IPO, last year's US$1.6 billion offering in Hong Kong of Hui Xian REIT, which has stakes in Beijing office properties.
If successful, Dynasty REIT's IPO would be the largest in Singapore this year, surpassing a US$526 million flotation by Far East Hospitality Trust in August.
Dynasty REIT will offer between 893.9 million and 901.3 million units to public and institutional investors in an indicative price range of S$0.86 to S$0.92 apiece, according to the trust's preliminary prospectus filed Wednesday to the Monetary Authority of Singapore. The units will be tradable in yuan and Singapore dollars.
The trust has secured two cornerstone investors: Credit Suisse AG and Amundi, an asset management joint venture between Credit Agricole and Societe Generale. Together, they have subscribed to about 137.6 million units.
ARA, which is 13.9%-owned by Mr. Li's property giant Cheung Kong (Holdings) Ltd. (0001.HK), plans to inject three Chinese commercial properties into Dynasty REIT's initial portfolio. The assets are in Shanghai, Nanjing and Dalian.
Dynasty REIT didn't state its planned listing date, but people with knowledge of the deal say the trust is likely to start trading on the Singapore Exchange by the end of October.
DBS Bank, Standard Chartered and Macquarie are handling Dynasty's share sale.
Singapore is positioning itself as an alternative to Hong Kong in the offshore yuan market, which has been growing rapidly. At the end of August, yuan deposits in Hong Kong totaled CNY552.3 billion, according to the Hong Kong Monetary Authority, jumping fivefold from July 2010, when Chinese authorities relaxed key rules for yuan's circulation in the territory. Singapore has more than CNY60 billion in bank deposits.
Yuan deposits are an important form of liquidity for investors and companies that trade in the currency.
One of the people with knowledge of the deal said earlier that ARA decided on denominating the deal in yuan because of the location of the REIT's assets and its belief in the long-term strength of the currency.
Still, Hui Xian REIT shares have fallen since they were listed, and another person had cautioned that this IPO may not be an easy sell amid worries about a moderating Chinese economy. Hui Xian REIT closed Wednesday at 4.02 yuan, down 23% from its IPO price of CNY5.24.
Singapore is going up against London, Tokyo, Taipei, Luxembourg and Kuala Lumpur, Malaysia, among others in its effort to become the world's second offshore yuan-trading hub after Hong Kong. In July, the Singapore government said that under an agreement with China, one of the two eligible Chinese banks now operating in Singapore would be authorized as a clearing bank for yuan, also known as the renminbi.
A potential expansion of yuan trading into other countries could help China's goal of making the yuan a widely used currency for cross-border trade and investment. Since late last year, Chinese authorities have taken a number of small steps to foster global use of the yuan, including making it easier for yuan funds to move in and out of the mainland and giving foreign investors greater access to domestic securities markets.
Singapore has a long history of REIT listings, and an investor base that likes assured yields from investments, as opposed to Hong Kong, where investors usually seek a first-day pop or capital growth.
REITs and business-trust offerings accounted for over 95% of the more than $7 billion raised in Singapore's larger IPOs last year, including the US$5.5 billion IPO by Mr. Li's Hutchison Port Holdings Trust. Singapore currently has 25 REIT listings with a total market capitalization of more than US$34 billion. Hong Kong has eight.
Singapore-listed REITs on average give an annual distribution yield of between 6% and 7%, offering an attractive investment in a low interest-rate environment. Some local banks offer just 0.25% interest on Singapore dollar deposits over a 12-month period.
(Source: Dow Jones Newswires)

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