A business trust holding three shopping malls in China's Guangdong province is going public in Singapore, in what will be the first mainboard listing this year.
Dasin Retail Trust intends to raise 586.4 million yuan (S$121 million) by floating about 151.8 million units - subject to an over-allotment option - via an initial public offering (IPO) launched yesterday. The units - 149.8 million for the placement tranche and two million for the public offer - are priced at 80 cents apiece.
This works out to an annualised distribution yield of 8.5 per cent for the forecast year 2017, the trustee manager said. The figure projected for 2018 is 9 per cent.
The trust, sponsored by developer Zhongshan Dasin Real Estate, will have an indicative market value of $440 million.
Its trustee manager said Singapore was picked owing to its "mature capital market" and large number of real estate investment trusts and business trust listed on the Singapore Exchange.
"We believe there must be many professional and high-quality investor with higher liquidity which can support the sponsor to inject more high-quality assets into the trust in the future," said Mr Yang Bin, chief executive of trustee manager Dasin Retail Trust Management.
Amount (in yuan) that Dasin Retail Trust wants to raise with its listing of 151.8 units
The price of each unit in the IPO
Annualised distribution yield for the forecast year of 2017.
An over-allotment option of up to 5 per cent of the offer size - about 7.6 million units - can be exercised.
The trust has also secured 120.8 million yuan from two cornerstone investors - China Orient Asset Management (International) Holding and Haitong International Investment Fund SPC.
Its key investment mandate is to invest in, own or develop land and income-producing real estate in Greater China, mainly for retail use.
The initial portfolio comprises three retail malls in Zhongshan City, south of the Pearl River Delta in Guangdong. They are Xiaolan Metro Mall, Ocean Metro Mall and Dasin E-Colour - which have a total gross floor area of about 314,884.9 sq m. The portfolio was valued at 4.6 billion yuan as at June 30 last year.
Another asset, Shiqi Metro Mall - set to be acquired by the trustee manager by June 30 - could be added to the portfolio in the future.
In addition, the sponsor has been granted the right of first refusal to the trustee manager for 14 completed and uncompleted properties.
The spectre of looming interest rate hikes could make Reits less attractive to investors as higher rates weigh on yield and also raise borrowing costs, affecting the ability of Reits to acquire assets.
However, the trustee manager remains confident about the listing. "Whether Reits or business trust, they are relatively stable income capital products on the market. Even though there is a potential for interest rates to climb, I think Reits and business trusts still can offer quite well returns and yields to the investors," Mr Yang added.
Net proceeds will be used to fund the acquisition of the initial portfolio assets, repay existing loans, defray listing expenses and for working capital purposes.
DBS Bank is the the sole financial adviser, global coordinator and issue manager for the offering.
The application for the public offer closes at noon on Jan 18, with trading on the mainboard expected to start at 2pm on Jan 20.