Sunday, August 5, 2012

Far East out to raise $718m in hospitality trust IPO

Straits Times: Sat, Aug 04

FAR East Organization, one of Singapore's biggest developers, is seeking to raise as much as $717.6 million in an initial public offering (IPO) of a Singapore hospitality trust.

The Far East Hospitality Trust will own seven local hotels such as Orchard Parade Hotel and Changi Village Hotel, as well as four serviced residences like Riverside Village Residences and Central Square Village Residences.

It is offering 329.4 million stapled securities to retail and institutional investors, to be priced between 86 cents and 93 cents each.

Ten cornerstone investors, including Aberdeen Asset Management Asia, AIA Group and NTUC Income Co-operative, have already agreed to subscribe to a combined 376.3 million units.

The offering will also include an over-allotment option of 65.9 million units. Assuming this option is fully exercised and including the cornerstone units, the IPO could raise $663.6 million to $717.6 million, depending on the issue price.

A preliminary prospectus lodged yesterday with the Monetary Authority of Singapore did not provide an indicative timetable for the listing. But it did project that the yield of the vehicle for next year will be between 6.3 per cent and 6.8 per cent, depending on the final pricing.

"The Singapore hospitality sector is expected to benefit from the strong growth of the Singapore economy and increasing tourist arrivals, with incoming tourism receipts expected to grow at up to a rate of 8.1 per cent from 2011 to 2012, according to CBRE," said the prospectus.

"Far East Hospitality Trust has 2,163 hotel rooms and 368 serviced residence units in its portfolio, offering investors an opportunity to invest in one of the largest portfolios of hospitality assets in Singapore by asset value."

DBS Bank, Goldman Sachs and HSBC are the joint financial advisers, global coordinators and issue managers.

"There has been quite strong support from 10 cornerstone investors," said Mr Matthew Song, head of equity capital markets for South-east Asia at HSBC.

Far East Hospitality Trust will list in the form of "stapled securities", each containing one unit of a real estate investment trust (Reit) and one business trust unit.

Mr Song said the assets will be under the Reit, with the business trust being dormant and only a master lessee of last resort. The sponsor is a group of companies under Far East Organization.

The listing of Far East Hospitality Trust is part of a restructuring exercise of some parts of the vast empire of Far East, established by the late property tycoon Ng Teng Fong.

Some of its hotels will come from Far East Orchard, formerly known as Orchard Parade Holdings.

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