Perennial on fast track

Singapore’s next big listing, Perennial China Retail Trust (PCRT), is hopping on board the transportation phenomenon that is sweeping over China. Plans for developments in high-speed rail are already underway across the country, such as the line between Beijing and Shanghai which cuts travel time in half.

PCRT may not be involved in the development of such tier one city stations but it does have second-tier cities in its sights.

The initial portfolio of the trust includes retail space connected to metro stations. The trust has also secured the option to invest in a pipeline of commercial development sites which are directly connected to high-speed railway stations in Chengdu and Xi’an. And with some 400,000 passengers expected to flow through Chengdu East Railway Station when it is completed, it is easy to see where the attraction and potential is for the retail developer and its partners.

Mr Pua Seck Guan, CEO of the Trustee Manager for PCRT, says that in an increasingly competitive environment, customer catchment is key, “I think it must be within the population catchment, well served by the transportation network, i.e. roads, MRT. I think these are very important because more than 60 per cent, 70 per cent of our customers come from means of transportation other than cars, so transportation network is very important.”

Mr Pua adds that he is already in discussions with other cities to develop retail and transportation models similar to PCRT’s current projects.

Industry players say that retail rentals in strategically located malls in Shenyang and Chengdu could climb at a pace of 10 to 15 per cent annually for the next eight years.

The bustling transportation hubs have also had an impact on the surrounding residential prices. For example, some experts note that residential property prices have doubled in value in the last two years in select areas surrounding new transportation infrastructure on the back of anticipated economic progression.

But while rental prices may be moving up at a rate akin to the high-speed transport they link too, market watchers say the verdict is not yet out on PCRT’s offerings. PCRT says yield for forecast year 2011 will come in at 5.30 per cent and 5.51 per cent for next year.

However, Mr Gabriel Yap, executive chairman at GCP Global, says: “The offer yields are even below 6.8 per cent yield of CapitaRetail China Trust, whose assets are in relatively better located areas in first and second tier cities in China.”

PCRT plans to raise S$776.2 million in gross proceeds from what is set to be the third-largest initial public offering in Singapore this year, behind Hutchison Port Holdings Trust and Mapletree Commercial Trust.

Funds will be raised from the offer and the issuance of sponsor units, as well as cornerstone units at 70 cents each. The business trust is offering about 564 million units and is expected to start trading on the SGX on June 9.

Source : Today – 6 Jun 2011

Join The Discussion

Compare listings