REIT IPO galore on SGX this year

At least seven real-estate investment trusts (REITs) are expected to make their debut on the Singapore Exchange (SGX) this year.

And like last year’s big-ticket IPOs of Global Logistic Properties and Mapletree Industrial Trust, analysts said the listings in 2011 could also include some heavyweights.

Experts said the seven upcoming REIT IPOs could together raise around S$4 billion.

REIT IPOs in the pipeline include that of Mapletree’s commercial property arm that analysts said could take place in late March or early April.

The IPO could raise more than S$1 billion and will have an asset portfolio of about S$2.5 billion, analysts said.

Perennial Real Estate is also reportedly set to list a REIT consisting of retail malls in China.

According to analysts, the Perennial retail REIT listing will potentially raise close to S$1 billion.

Market watchers said the REIT market in Singapore still has room to grow.

George Lee, executive VP of Group Investment Banking at OCBC Bank said: “If you look at the FTSE sub-index, year-to-date it has risen by 11.6 per cent. Now compare that to the trough reached in March 2009, the index has risen by 149 per cent.

“Our view is that it has not over-shot, because notwithstanding the very strong performance of the REITS sector in the last couple of years, it is still 37 per cent off the peak reached in June of 2007.”

A bullish equity market that could see the Straits Times Index (STI) hit 3,500 to 3,600 this year, and strong performance by last year’s IPOs could encourage more trusts to list on the exchange in 2011, analysts said.

Tax benefits and ease of fundraising are the reasons why REITs are flocking to the SGX.

The income of listed REITs is tax-free in Singapore because they distribute 90 per cent of it to unit-holders. Properties sold to listed REITs are not subject to stamp duties either, experts said.

Other REIT IPOs this year may include a Shariah-compliant REIT of Middle East hospitality assets, three hospitality trusts from Singapore and Hong Kong, and an industrial trust.

“REITs are attractive investments to investors because they provide relatively stable yield. There’s potential upside in stock prices and there is strong steady income for a very certain period – usually 3 to 5 years. So on this basis, they are attractive to investors,” said Robson Lee, partner at Shooklin & Bok.

Analysts also expect REITs to be attractive investments this year because they are a good hedge against inflation.

Source : Channel NewsAsia – 27 Jan 2011

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