Sabana REIT prices its IPO at S$1.05 per unit

Sabana REIT priced its initial public offering (IPO) on Monday at S$1.05 per unit.

This will be the first Shariah-compliant real estate investment trust (REIT) listed on the Singapore exchange (SGX), as well as the world’s largest listed Shariah-compliant REIT by total assets.

The public offer will close on November 24, and trading of the units on the SGX is expected to commence at 2pm on November 26.

The REIT hopes to raise S$533.4 million in gross proceeds through this listing.

Singapore’s industrial property sector is poised to attract regional investors from the Middle East.

Analysts expect Sabana REIT to attract Middle Eastern investors as there are not many such Shariah-compliant REITs in Asia.

And the three that there are in the region are all listed in Malaysia.

Shariah-compliant REITs stay away from properties that have any connection to activities and products forbidden by Shariah law, such as gambling, alcohol or pork.

Raj Mohamad, managing director of Five Pillars, said: “This product requires some kind of certification, which the Middle East investors are looking for. But if you look at the operation, look at the asset, the returns, they are almost like any other investment or REIT for that matter.”

Sabana REIT will initially hold 15 industrial properties in Singapore.

According to its prospectus, the industrial properties include office buildings-cum-warehouses, logistics warehouses and chemical warehouses.

The trust believes that there is sustained demand for industrial properties.

Its tenants include City Development and Ho Bee Investment.

Kevin Xayaraj Tay, chief executive of Sabana Investment Partners, said: “Given the quality of the master tenants that we have, that should in turn provide secured and steady income stream and attractive yields for unitholders.”

The initial REIT property portfolio is expected to generate stable distribution yields forecast at between 8.22 per cent and 8.25 per cent for the next two years.

Analysts said Sabana REIT’s projected distribution yield of more than 8 per cent is quite attractive, based on the average yield offered by other REITs here.

And market watchers believe that this could attract first time Shariah-compliant investors into the market.

Analysts also believe that the recent IPO of Mapletree Industrial Trust (MIT) has boosted investors’ confidence.

GCP Global’s executive chairman, Gabriel Yap, said that MIT has done very well and currently provides a yield of 6.3 per cent to its investors.

Source : Channel NewsAsia – 22 Nov 2010

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