By Rujun Shen and Saeed Azhar
A Chinese tycoon plans to buy about 60 percent of the initial public offering of IREIT Global, a Singapore real estate investment trust that will invest in European properties, in his latest push to ramp up REIT investment in Singapore.
Rich Chinese investors have become increasingly interested in Singapore's REITs, admiring their stable returns and seeking alternatives to park their wealth, while the Chinese property market, where many of them have made their fortunes, remains shaky.
Tong Jinquan, a self-made property tycoon ranked by Forbes as China's 35th richest man, plans to buy 254 million of the 423 million units in the IPO, which are being offered at S$0.88 a unit, according to the prospectus filed on Wednesday evening.
The IPO aims at raise about S$372 million ($299 million).
"Chinese investors have been key buyers of properties in Singapore in the past. Now the property outlook is softening, and they are exploring other asset classes, including REITs," said Vikrant Pandey, an analyst at brokerage UOB Kay Hian.
The 15 percent stamp duty the Singaporean government imposes on foreign buyers of properties also helps push investors to seek alternatives and REITs have been appealing, Pandey added.
"For the high net worth individuals, the current 6 to 7 percent REIT yield is pretty attractive," he said.
With a portfolio of four properties in Germany, IREIT is expected to have an initial focus on Germany and the United Kingdom.
DBS Bank Ltd is sole global coordinator for the deal and is a joint bookrunner with Barclays.
Tong's holdings in nine Singapore-listed REITs add up to about $780 million, Thomson Reuters data showed.
He owns 64.75 percent of Viva Industrial Trust, 4.58 percent of Suntec Real Estate Investment Trust, 12.93 percent of Cambridge Industrial Trust and 16.20 percent of OUE Commercial Real Estate Investment Trust, among others.
Tong is not alone in buying into Singapore's REITs. Gordon Tang, a Chinese national who heads the Singapore-listed property developer Singhaiyi Group, stood side-by-side with Tong as cornerstone investors in the initial public offerings of both OUE Commercial REIT and Frasers Hospitality Trust.
The FT ST REIT index, which tracks the performance of REITs listed in Singapore, has risen more than 8 percent so far this year, beating the 4 percent gain in the benchmark Straits Times Index.
Tong's Summit Group, which owns some high-end hotels and the popular shopping centre Longemont in Shanghai, held total assets of 64.9 billion yuan ($10.46 billion) at the end of 2013, according to IREIT's prospectus.
