The first initial public offering (IPO) on the Singapore Exchange mainboard for the year is in the offing, as China's Beijing Hualian Group (BHG) has applied to list some of its China retail assets.
It lodged its preliminary prospectus for BHG Retail real estate investment trust (Reit) yesterday. The Reit will be the first China retail Reit to be sponsored by a China- based group, it said.
Its strategy will be to invest in real estate used mainly for retail purposes, with an initial focus on China.
It intends to raise gross proceeds of about $394.2 million from the listing as well as the issuance of sponsor units, strategic investor units and cornerstone units.
Cornerstone investors include a subsidiary of China Hi-Tech Group Corporation, a Chinese state- owned enterprise; China Life Insurance, which is listed on the Hong Kong Exchange; the asset management arm of China Merchants Bank; and Reignwood Group chairman Chanchai Ruayrungruang.
BHG Retail Reit's listing breaks a nearly full-year drought of new Reit listings. Keppel DC Reit, launched last December, is the most recent.
BHG Reit's initial portfolio will comprise a 60 per cent interest in Beijing Wanliu Mall in downtown Beijing; Hefei Mengchenglu Mall in Hefei's North First Ring retail hub; Chengdu Konggang Mall, in an emerging residential area in Chengdu; Dalian Jinsanjiao Property, master-leased to a hypermarket and not far from the Huanan retail hub; and Xining Huayuan Mall in Xining's Ximen-Dashizi retail hub.
These have an aggregate gross floor area (GFA) of about 263,688 sq m and were valued at about 2.8 billion yuan (S$620 million) in all on June 30.
The sponsor is Beijing Hualian Department Store Company, part of BHG Group, which has over 20 years of retail operating experience, the group said in the preliminary prospectus. It manages retail properties, operates supermarkets and hypermarkets, and retail distributorships. It also operates a luxury department store in Beijing.
"As part of the BHG Group, BHG Retail Reit will benefit in terms of acquisition growth in China where the sponsor has an active real estate presence," the group said. The sponsor has identified 12 properties with a total GFA of 722,512 sq m under its voluntary right of first refusal.
The manager - an indirect wholly owned subsidiary of the sponsor - will benefit from the sponsor's experience in pursuing opportunities to acquire assets, and will also leverage on existing relationships with tenants to create new leasing opportunities, the group said.
Proceeds from the listing will go towards repaying debt, paying transaction costs incurred in relation to the offering, and working capital, among others.
Based on the IPO price of 80 cents a unit, the market value will be $597.2 million. The Reit's net assets came to $550.6 million as at Aug 31, according to its unaudited pro forma financial statements.
The Reit is projecting a 6.3 per cent distribution yield for next year, against 5.7 per cent for the forecast period this year.
Trading in the units is expected to start at 2pm on Dec 11.