Far East plans to list REIT next year: Update

Singapore property developer Far East Organisation plans to raise at least $500 million through the listing of some of its hotel and serviced residence assets in a real estate investment trust next year, according to sources familiar with the deal.

Singapore’s real estate investment trust (REIT) market, the third-largest in Asia after Japan and Australia, has been attracting listings at a time when investors are seeking stable yields amid uncertainties and market volatility.

Last year, a total of US$1.43 billion ($1.74 billion) was raised through three initial public offerings of REITS in Singapore, including Mapletree Industrial Trust (MAPI.SI).

 

Far East’s hospitality IPO is likely to attract investors who are seeking to tap into the boom in Singapore’s tourism, where tourist arrivals have surged 20% last year, helped by strong economic growth in the region and the opening of two mega casino-resorts in the city-state.

 

“Given Singapore Tourism Board’s bullish 2015 tourist arrival figures, the industry outlook is likely to be positive,” said Ng Kian Teck, an investment analyst at SIAS Research.

Singapore welcomed 11.6 million visitors from overseas last year, and expects to attract 17 million visitors annually by 2015.

 

“This makes it is a good time for developers to list some of their hotels and investors are likely to welcome listings that can offer stable and attractive yield, in view of current uncertain market condition,” Ng said.

 

DBS (DBSM.SI), Goldman Sachs (GS.N) and HSBC (HSBA.L) have been hired as the lead bankers for the Far East deal, two sources with direct knowledge of the matter told Reuters.

 

“It’s still in the early stages, but the IPO could be around $500 million,” one of the sources said.

 

Far East’s Orchard Parade Hotel in Singapore may be among the assets spun off into the reit, one of the sources said.

 

The property developer owns seven hotels and 10 serviced residences in Singapore as well as and one in Malaysia.

 

Far East, together with its Hong Kong-based sister company Sino Group, own assets valued at over US$40 billion together and have an annual turnover of US$4.3 billion.

 

DBS, Goldman Sachs and Far East Organisation have declined to comment, while HSBC was not immediately available for comment.