BHG Retail REIT

[greengiraffe]

http://www.channelnewsasia.com/news/busi...l?cid=fbsg

Channel NewsAsia
China retail giant Beijing Hualian plans Singapore REIT listing
BHG Retail REIT plans to sell a total of 150.13 million units through placement and to institutional and retail investors at S$0.80 each to raise around S$120 million.

Roadside Comments: massive financial engineering

4.5% yield without financial engineering

basically 30% of shares not entitled to dpu

Book Message :
·        Four cornerstone investors have anchored approx 53% of the offering.
·        Good pre-launch indication ahead of the formal bookbuild
 
 
*****************************************
IMPORTANT NOTICE
By receiving this communication you agree to comply with the restrictions set out below
To be eligible to receive this communication, investors must be outside the United States. By accepting this communication, you shall be deemed to have represented to us that you and any customers you represent are outside the United States and the electronic mail address that you gave us and to which this e-mail has been delivered is not located in the United States.
This communication is not an offering memorandum or prospectus and should not be treated as offering material of any sort and is for information purposes only. This communication does not constitute or form part of any offer for sale or subscription of or solicitation or invitation of any offer to buy or subscribe for any securities nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever.
The information in this communication is based on, and qualified in their entirety by information found in the preliminary prospectus prepared by BHG Retail Trust Management Pte. Ltd., as manager of BHG Retail REIT (the “REIT Manager”) and lodged with the Monetary Authority of Singapore (“MAS”) on 23 November 2015 (the “Preliminary Prospectus”), which is subject to further verification, updating, revision, amendments and completion in the final prospectus (the “Final Prospectus”) which may be issued by the REIT Manager upon the registration of the same by, the MAS. Any purchase of securities should be made solely on the basis of the information contained in the Final Prospectus. Each person receiving this communication should consult his/her professional advisers in respect of any investment in securities.
The securities referred herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act. There will be no public offering of the securities in the United States.
There will be no offer of the securities unless it is made in reliance upon an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any applicable state or local securities laws. The securities are being offered and sold in offshore transactions as defined in and in reliance on Regulation S under the Securities Act. There is no intention to register any of the securities referred to herein in the United States and no public offering of securities will be made in the United States or in any jurisdiction (other than in Singapore upon registration of the Final Prospectus by the MAS) where such an offering is restricted or prohibited. The distribution of this communication in certain jurisdictions may be restricted by law, and persons into whose possession these materials come should inform themselves about, and observe, any such restrictions.
Distribution of this communication to any person other than the recipient is unauthorised. Failure to comply with this directive may result in a violation of the U.S. Securities Act of the applicable laws of other jurisdictions.
Others. Other relevant selling restrictions are set out in the “Plan of Distribution – Distribution and Selling Restrictions” section of the Preliminary Prospectus.
 
ISSUER: BHG Retail REIT (“BHG Retail REIT”)
 
SPONSOR: Beijing Hualian Department Store Co. Ltd. (the “Sponsor” or “BHDS”)
 
SPONSOR STAKE: The Sponsor, through its wholly-owned subsidiary, Beijing Hualian Mall (Singapore) Commercial Management Pte. Ltd. (“BHG Singapore”), will hold 5.0% of the total number of units in issue post-offering, subject to an over-allotment option granted by BHG Singapore
 
STRATEGIC INVESTOR: Beijing Hua Lian Group (Singapore) International Trading Pte. Ltd. (“the Strategic Investor”)
 
STRATEGIC INVESTOR STAKE: The Strategic Investor, a wholly-owned subsidiary of Beijing Hualian Group Investment Holding Co., Ltd (“Beijing Hualian Group”), a company incorporated in the PRC holding 29.58% of the total issued equity interest of the Sponsor, will hold 30.1% of the total number of units in issue post-offering
 
REIT MANAGER: BHG Retail Trust Management Pte Ltd. (100% indirectly owned subsidiary of the Sponsor) (the “Manager”)
 
LISTING: Mainboard of SGX-ST, in SGD
 
DESCRIPTION: For more information, please refer to the preliminary prospectus lodged with MAS dated 23 November 2015
 
·        BHG Retail REIT is a Singapore-registered real estate investment trust established with the investment strategy of investing principally, directly or indirectly, in a diversified portfolio of income-producing real estate which is used primarily for retail purposes (whether either wholly or partially), as well as real estate-related assets in relation to the foregoing, with an initial focus on China.
·        The initial portfolio of BHG Retail REIT comprises of five retail properties strategically located in Tier 1, Tier 2 and other cities of significant economic potential in China, with an aggregate GFA of approximately 263,688 sq m and a total appraised value of approximately RMB 2.8 billion (equivalent to approximately S$605.9 million) as at 30 June 2015.
·        The Sponsor of BHG Retail REIT is Beijing Hualian Department Store Co., Ltd., an established PRC home-grown retail property operator listed on the Shenzhen Stock Exchange and with a market capitalization of approximately RMB 13.0 billion as at 13 November 2015.  The Sponsor is part of the BHG Group, which includes Beijing Hualian Group Investment Holding Co., Ltd. (“Beijing Hualian Group”) and BHG Hypermarket (collectively, the “BHG Group”).
·        BHG Group is a leading integrated retail group in China with more than 20 years of retail operating experience.  It forms an entire retail value chain consisting of operating of supermarkets and luxury department stores, management of retail properties, and possesses a strong branding in the PRC, an established mall operation capability, a wide network of retail properties and an extensive tenant base.
 
SYNDICATE: DBS Bank Ltd. as the Sole Financial Advisor and Sole Underwriter
 
OFFERING PRICE: S$0.80 per Unit
 
TOTAL UNITS OUTSTANDING, POST OFFERING: 492,725,000 units
 
MARKET CAPITALISATION: S$394.2 mil
 
FREE FLOAT: Appx. 64.9% (based on total units excluding sponsor and strategic investor stake)
 
TOTAL OFFERING SIZE (CORNERSTONE TRANCHE AND BASE OFFERING): S$255.8mil / 319,778,400 units which comprise the following:
 
CORNERSTONE TRANCHE: S$135.7mil / 169,651,000 units committed by the following investors:
·        China Life Insurance Company Ltd. (46,975,000 units)
·        Dr Chanchai Ruayrungruang (Dr Yan Bin) (43,509,000 units)
·        China Hi-Tech Holding Company Ltd. (41,667,000 units)
·        China Merchants Bank Asset Management (37,500,000 units)
 
BASE OFFERING (EXCLUDING CORNERSTONE TRANCHE):
·        S$120.1mil / 150,127,400 units for international placement to investors, outside of the United States of America, and for Public Offer in Singapore
 
OVER-ALLOTMENT OPTION: S$19.71mil / 24,636,300 units (16.4% of the Base Offering). The exercise of the over-allotment option will not increase the total number of units in issue post-offering
 
OVER-ALLOTMENT PROVIDER: Beijing Hualian Mall (Singapore) Commercial Management Pte. Ltd. (“BHG Singapore”)
 
FORECAST DISTRIBUTION YIELD: 6.3% FY16
 
LEVERAGE (BORROWINGS/ASSETS): 33.5%
 
DISTRIBUTIONS UNDERTAKING: The Strategic Investor shall not be entitled to any distributions on
·        147,817,500 units constituting 30.0% of the total number of units on the Listing Date immediately after the completion of the offering (the “Units”) in respect of the distribution period from the date of issuance up to and including 31 December 2016
·        135,499,375 units constituting 27.5% of the Units in respect of the distribution period from 1 January 2017 up to and including 31 December 2017 
·        123,181,250 units constituting 25.0% of the Units in respect of the distribution period from 1 January 2018 up to and including 31 December 2018
·        73,908,750 units constituting 15.0% of the Units in respect of the distribution period from 1 January 2019 up to and including 31 December 2019
·        24,636,250 units constituting 5.0% of the Units in respect of the distribution period from 1 January 2020 up to and including 31 December 2020
492,800 of the Strategic Investor units constituting 0.1% of the total number of Units are not subject to Distributions Undertaking.
 
LOCK-UP:
·        First 6 month 100% lock-up on each of Sponsor and Beijing Hualian Group units
·        Next 6 month 50% lock-up on each of Sponsor and Beijing Hualian Group units
·        Separately, the Strategic Investor will lock-up its interest in its units in accordance with the Distributions Undertaking
 
 INDICATIVE TIMETABLE:
·        Lodgement: 23 Nov, Mon
·        Roadshow: 23 Nov, Mon – 27 Nov, Fri
·        Books open: 23 Nov, Mon
·        MAS Registration: 2 Dec, Wed
·        Singapore Public Offer: 2 Dec, Wed – 7 Dec, Mon
·        Books close & allocation for Placement & Public Offer: 7 Dec, Mon
·        Expected listing on the SGX-ST: 11 Dec, Fri
 
INDICATIONS OF DEMAND: Demand to be reflected in SGD or Number of Units only
 
END PLACEE BROKERAGE: 1.0% & applicable broking charges and GST payable

[Art or Science]

Fool has quite a good write-up on this IPO

https://www.fool.sg/2015/11/24/5-things-...oming-ipo/

[Contrarian]

Choose to list in a bad time like this?

[opmi]

http://www.hkexnews.hk/listedco/listcone...924650.pdf

PROSPECTS (from Hang Lung Chairman)

Given the slower retail markets in both Mainland China and Hong Kong, we are bracing
ourselves for a long winter. I would be happy to be proven wrong, but it seems prudent at
this stage to be cautious. We do not see many encouraging signs in the economy nor our
.industry

Consider the fact that within six months of our opening Tianjin Riverside 66 last Fall, at
least six sizable retail outlets in the City had closed down! We do not for a moment think
that we are the cause of their troubles. We are not that powerful, being among the best
in the market notwithstanding. While recognizing that there will be less competition going
forward, we are not particularly pleased with this development, for it tells us that the
.market is lethargic and there is no end in sight

Coincidentally all six closed-down retail facilities in Tianjin were department stores. It
was not that long ago when institutional investors asked us which model – traditional
department stores versus shopping centers – was superior. I thought the answer was
obvious but one could have easily accused me for being biased. Now most people are
;as convinced as I am. This however does not mean that all malls are spared from trouble
rather, it merely says that the weaker model will be the first to be hurt. (That said, some
department stores will survive.) If consumer confidence remains low, the inferior malls will
.also go. This is already happening

Fortunately not only do we have some of the best properties in the market, we are also
financially very strong. For the past nine years and to this day, we basically have zero
net debt. As such, it is difficult to think of an exogenous factor that can kill us. The same
.cannot be said for most of our competitors
Observing for some years the glut of inferior retail space in Chinese cities, I have long
pondered over how the industry will evolve. Now the answers are unveiling before us at
.considerable speed

The simplest form is to close down, or at least to mothball the property. Many are doing
just that. To figure out an alternative use will tax one’s ingenuity. One possibility is to turn
them into old folks’ activity centers. Given an ageing society, there will be considerable
demand for such facilities. However, how to make money therefrom is another issue. Retail
rental is among the highest yielding for any space, which means that most other usage, if
.not all, will bring inferior returns

A few daring souls are buying up failed shopping centers. Perhaps the new owners will
,be able to come up with better usage. But if all they do is to keep the space for retail
then I question their chances of success. The main reason for mall failure is not the
software but the hardware, i.e. what I call “real estate genetics” – location, size, design
and construction. These are factors which can never be changed once a facility is
constructed. It is like a short man not being able to play professional basketball or a tall
man doing gymnastics. A switch to a better coach will not help, for it is the genetics that
.counts the most

[greengiraffe]

http://www.hkexnews.hk/listedco/listcone...924650.pdf

PROSPECTS (from Hang Lung Chairman)

Given the slower retail markets in both Mainland China and Hong Kong, we are bracing
ourselves for a long winter. I would be happy to be proven wrong, but it seems prudent at
this stage to be cautious. We do not see many encouraging signs in the economy nor our
.industry

Consider the fact that within six months of our opening Tianjin Riverside 66 last Fall, at
least six sizable retail outlets in the City had closed down! We do not for a moment think
that we are the cause of their troubles. We are not that powerful, being among the best
in the market notwithstanding. While recognizing that there will be less competition going
forward, we are not particularly pleased with this development, for it tells us that the
.market is lethargic and there is no end in sight

Coincidentally all six closed-down retail facilities in Tianjin were department stores. It
was not that long ago when institutional investors asked us which model – traditional
department stores versus shopping centers – was superior. I thought the answer was
obvious but one could have easily accused me for being biased. Now most people are
;as convinced as I am. This however does not mean that all malls are spared from trouble
rather, it merely says that the weaker model will be the first to be hurt. (That said, some
department stores will survive.) If consumer confidence remains low, the inferior malls will
.also go. This is already happening

Fortunately not only do we have some of the best properties in the market, we are also
financially very strong. For the past nine years and to this day, we basically have zero
net debt. As such, it is difficult to think of an exogenous factor that can kill us. The same
.cannot be said for most of our competitors
Observing for some years the glut of inferior retail space in Chinese cities, I have long
pondered over how the industry will evolve. Now the answers are unveiling before us at
.considerable speed

The simplest form is to close down, or at least to mothball the property. Many are doing
just that. To figure out an alternative use will tax one’s ingenuity. One possibility is to turn
them into old folks’ activity centers. Given an ageing society, there will be considerable
demand for such facilities. However, how to make money therefrom is another issue. Retail
rental is among the highest yielding for any space, which means that most other usage, if
.not all, will bring inferior returns

A few daring souls are buying up failed shopping centers. Perhaps the new owners will
,be able to come up with better usage. But if all they do is to keep the space for retail
then I question their chances of success. The main reason for mall failure is not the
software but the hardware, i.e. what I call “real estate genetics” – location, size, design
and construction. These are factors which can never be changed once a facility is
constructed. It is like a short man not being able to play professional basketball or a tall
man doing gymnastics. A switch to a better coach will not help, for it is the genetics that
.counts the most

wah this is frankest opinion from GODFather of China Retail... salute...

GG

[Nick]

http://www.channelnewsasia.com/news/busi...15844.html

IPO launched.

[Dosser]

Relatively low yield, after the initial, artificial, boost.

Retail properties in China.

REITs on SGX generally well down from their peaks.

Dosser will not be queuing up at the ATM for this IPO.

[grubb]

I think i saw an interview with the CEO on business times. She said that there is no competition with BHG, which i think is nonsense. Perhaps from the perspective of the location of the current properties and saturation of the suburban mall market, then yes, but the other players are not stupid. Dalian Wanda is also aggressive in expanding its suburban malls. E-commerce is killing retail too. If Ronnie Chan is not optimistic, its hard to imagine otherwise. The growth story is not as intact as it seems.

Besides, there is also the issue of further RMB devaluation.

[fundamentalman]

I am more comfortable with Huixian REIT
Low gearing, high yield (more than 8% at current price), and managed by Li ka shing's company.

[Nick]

I am more comfortable with Huixian REIT
Low gearing, high yield (more than 8% at current price), and managed by Li ka shing's company.

IIRC, there is income support for Huixian REIT latest M&A.