Far East Organization (FEO) will likely raise at least S$500 million through the listing of some of its hotel and serviced residence assets in a real estate investment trust (Reit) next year, according to sources with direct knowledge of the deal.
Singapore’s Reit market has been attracting listings at a time when investors are looking for stable yields in the midst of market volatility and uncertainties.
FEO’s hospitality initial public offering (IPO) is expected to draw investors who are seeking to benefit from Singapore’s tourism, where tourist arrivals rose 20 percent in the previous year, aided by robust economic growth in the region and the launching of two mega casino-resorts in the city-state.
“Given Singapore Tourism Board’s bullish 2015 tourist arrival figures, the industry outlook is likely to be positive,” said Ng Kian Teck, an investment analyst at SIAS Research.
“This makes it a good time for developers to list some of their hotels and investors are likely to welcome listings that can offer stable and attractive yield, in view of current uncertain market condition.”
HSBC, DBS and Goldman Sachs have been hired as the key bankers for the FEO transaction, according to two sources quoted by Reuters.
“It’s still in the early stages, but the IPO could be around S$500 million,” said one of the sources.
One of the sources added that FEO’s Orchard Parade Hotel in Singapore may be one of the assets spun off into the Reit.
Orchard Parade said that while it is in preliminary discussions with Far East over a possible injection of some assets into a Reit, such discussions are preliminary only and there is no certainty that a transaction would be carried out.
The company also said it is unable to comment on whether Far East will in fact proceed with a Reit.