Former CapitaLand retail chief 'to list $1b Reit'

[Musicwhiz]

In terms of classification, I didn't really know where this should go!

Jan 6, 2011
Former CapitaLand retail chief 'to list $1b Reit'

PERENNIAL Real Estate, a firm set up by former CapitaLand retail chief Pua Seck Guan, has hired Goldman Sachs, DBS Bank and Standard Chartered Bank to help it raise as much as $1 billion in a property trust initial public offering (IPO), sources with knowledge of the deal said yesterday.

Perennial intends to list a business trust in Singapore that will comprise mostly shopping malls in China, said the sources, who declined to be named.

Pre-marketing of the deal is scheduled to begin later this month, with the formal launch of the IPO slated for the end of March, the sources added.

A spokesman for Perennial, which is involved in the development and management of malls as well as property funds, said it has businesses in China, India and Singapore and 'continues to explore opportunities in these markets'.

The three banks either declined comment or could not be reached.

By putting its assets in a business trust, Perennial has greater scope to invest in properties under development, and retains the flexibility of paying out a smaller portion of rental income to shareholders, two of the sources said.

Mr Pua, who is widely credited with building CapitaLand's malls business, resigned from South-east Asia's biggest developer in September 2008, sparking a 7 per cent fall in the firm's share price.

His firm is now leading the redevelopment of three commercial properties in Singapore, and backers of his unlisted China funds include Beijing Hualian Group.

REUTERS

[Zelphon]

REITS Euphoria coming...

Better start to avoid REITS as more and more gets listed...

Anything China-related REITS gotta avoid....

[Nick]

Highly likely it will form a property development trust. Good to see more companies from this asset class seeking listing here.

[Musicwhiz]

I agree with Zelphon on this. The REITs sector is getting a little too "hot", and articles written on it are almost perenially bullish.

Plus, I share the same sentiments about China property assets - basically the idea is to inject these overvalued assets into a REIT and sell them to the unsuspecting public!

[freedom]

too many reits already.

reits business going to get crushed very soon...

[Nick]

I don't think Chinese assets have very high asset yield and the best assets tend to be owned by SOEs and those in the market for the past 2 decades. REITs have no choice but to buy lower quality assets in 1st tier cities or go for higher yielding malls in the more risky 2nd and 3rd tier malls. It must also be noted that the land lease in China tend to be around 4-8 decades as well. Hence personally, I think it is much better to invest in a company which has the ability to develop its own properties. This could be done by investing heavily in asset enhancement schemes in lower quality malls in 1st tier cities or by developing new malls in 1st tier city or using good foresight to develop new malls in attractive 2nd tier city. A REIT cannot do any of those - only a property developer (like CMA) or a developer trust (like TCT) has such abilities. Hence, if the above company lacks an established sponsor, I think its wise to structure it as a developer trust with much lower payout ratio.

I cannot comment on the merit or demerit of this particular investment since I don't even know what they own etc !