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Saturday, 23 October 2010

Small Reits may not attract enough investor attention to fund asset growth

By JAMIE LEE


NEW real estate investment trusts (Reits) listing in Singapore should be sizeable - or risk being 'orphans'.

The listing of GLP, in particular, is likely to encourage other companies in the region to look at Singapore as a listing venue. It should open the Singapore market up, according to Tracey Woon, head of global banking at Citi Singapore.

'Size matters,' says Tracey Woon, head of global banking at Citi Singapore. 'People do look at who the sponsor is, the pipeline and the growth potential. It is a vicious circle - when you are a small Reit, you may not attract enough investor attention to fund your asset growth. So without the size, you might run the risk of being an orphan Reit.'

In the eight years since Singapore's first Reit, CapitaMall Trust, was listed in 2002, the market here has grown to 24 Reits. Of these, five have a market cap of less than $500 million and nine have a market cap of less than $1 billion.

The latest additions to the local Reit scene are Mapletree Industrial Trust (MIT) and Global Logistic Properties (GLP), which have just debuted.

The back-to-back launches of the two IPOs - which raised more than $5.1 billion - showed the Singapore market is deep enough to absorb such mega listings.

In the eight years since Singapore's first Reit, CapitaMall Trust, was listed in 2002, the market here has grown to 24 Reits. Of these, five have a market cap of less than $500m and nine have a market cap of less than $1b.

'Liquidity is not an issue. We never doubted that GLP and MIT would be well received,' says Ms Woon, who handled both listings.

The listing of GLP, in particular, could encourage other companies in the region to look at Singapore as a listing venue.

Some companies, such as AIA Group, have chosen to list in Hong Kong, believing the market there - particularly the retail investor pool - is deeper. 'But GLP should open the Singapore market up,' says Ms Woon.

Derek Zhu, Southeast Asia director of Global Investment Banking at Citi Singapore, says the amount of retail money available in Singapore extends far beyond the cash that comes in through ATM applications.

Plenty of retail interest comes from clients who request share placements through brokers and private banks, he says.

GLP's public tranche was 11 times subscribed, which means $2.22 billion in applications poured through from ATMs. Its balloting results showed 22 successful public applicants first wanted a million shares or more, coughing up at least $1.96 million upfront, as each share cost $1.96. Each of these applicants was given 10,000 shares.

MIT's public tranche was subscribed 27.7 times, translating to about $2.1 billion in application money. And as with MTI, there were 122 successful public applicants that first sought at least one million units, translating to a $930,000 upfront payment per head. These successful applicants were allotted 12,000 units each, based on the ballot.

Unlike Hong Kong, Singapore does not have a minimum size for share sold to the public, nor a claw-back requirement for the public tranche of popular IPOs.

Hong Kong listing rules state that at least 10 per cent of an IPO must be allocated to the public. And this can rise to 30 per cent if an IPO is 15 times subscribed, or go as high as 50 per cent if it is at least 100 times subscribed.

'Whether this is an advantage is a matter of perspective, but Hong Kong regulates the minimum size of the public offer and increases it when the deal is heavily subscribed, whereas Singapore doesn't regulate it, so issuers and banks have more flexibility,' adds Mr Zhu.

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