Commercial & Industrial Property News Update

Singapore - ARA Asset Management To Offer Yuan-based REIT

August 23, 2012

ARA Asset Management Ltd plans to inject some of its Chinese properties into a real estate investment trust (REIT) as the basis of a yuan-denominated real estate initial public offer (IPO) priced at USD 640 million.

According to unnamed sources, Singapore's first yuan-denominated share sale will come from ARA Asset Management Ltd, a Singapore real estate firm partly owned by Hong Kong tycoon Li Ka-shing.

ARA, which manages office, retail and commercial assets across Asia, plans to inject some of its Chinese office and retail properties currently held under its flagship private real-estate fund, Asia Dragon Fund I, into a REIT, which will provide the basis for the world's second yuan-denominated IPO outside of China.

The IPO, which is scheduled to pass by the end of October, is said to be priced at USD 640 million. It is estimated that the deal could raise between SGD 700 million and SGD 800 million.

ARA is understood to be wooing large Chinese institutional investors as cornerstone investors, who would commit to holding share in exchange for first picks in the planned IPO, said the sources.

Its Asia Dragon Fund I ended fundraising in 2008 after securing USD 1.1 billion in committed capital. The fund manages residential, office and retail properties in China, Singapore, Hong Kong and Malaysia.

The yuan-denominated IPO was originally planned for July, but ARA postponed the deal due to the eurozone crisis. Since then, a number of REITs have successfully raised funds via IPOs: Ascendas Hospitality Trust raised USD 465 million in late July, while demand is high for Far East Hospitality Trust's USD 526 million offering launched on 27 August.

Ascendas and Far East went ahead with their IPOs despite Formula One Group's postponement of its USD 2.5 billion offer at end-June, and the removal of an USD 1 billion IPO by India's Reliance Communications, citing concerns over anemic demand.

Preliminary estimates indicate that ARA's proposed REIT could offer annual yield of between 6% to 7% - which would be on par with Singapore-listed REITs, of which there are currently 24. The total market capitalisation of listed REITs in Singapore is USD 33 billion.

Tags: Income properties, Commercial real estate

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