By Elzio Barreto
HONG KONG, April 25 Japan-focused Croesus Retail Trust (CRT) launched a $292 million Singapore IPO on Thursday, looking to benefit from demand for high-yield securities and an expected increase in consumer spending in the world's third-largest economy.
The deal comes as a surge in demand for real estate investment trusts (REITs) pushed Singapore's REIT index to an all-time high last week. It also looks to capitalize on renewed optimism over Japan's economy on the back of Prime Minister Shinzo Abe's aggressive fiscal and monetary expansion campaign.
Japan's consumer confidence index hit its highest in more than five years in February and many analysts see that as a sign that the economy is recovering.
CRT, which owns four shopping malls in Japan, is offering 391.1 million units at a price of S$0.93 each, putting the total deal at S$363.7 million ($292.4 million), said a source with direct knowledge of the plans, who was not authorized to speak publicly on the matter.
The trust, which is part-owned by Marubeni Corp. and Daiwa House Industry Co. Ltd., had originally planned to go public last year with a $650 million deal, but decided to postpone the IPO to 2013 after initial meetings with investors.
The offering comes on the heels of the largest-ever REIT IPO in Singapore, the $1.3 billion listing in February by Temasek-backed Mapletree Greater China Commercial Trust . It also follows a 35 percent surge in the FTSE Straits Times REIT index as investors flocked to the high-yielding securities to boost returns amid low global interest rates and volatile stock markets.
CRT forecast a yield of 8 percent for the financial year ending June 30, 2013 and 8.1 percent the following year, according to the IPO prospectus.
The projected returns compare with an average of 5 percent on retail REITs in Singapore for the 12 months through the end of March and a 5.2 percent 2013 forecast yield for the country's largest REIT, CapitaMall Trust, according to Asia Pacific Real Estate Association (APREA) data. In Japan, retail REITs posted an average yield of 3.9 percent through March.
REIT listings in Asia rose 21 percent to $9.64 billion in 2012 from $7.97 billion in 2011, according to APREA. Other offerings by business trusts and REITs expected in the coming months in Singapore include a $1 billion offering by Asian Pay Television Trust, an up to $700 million IPO for GE Commercial Aviation Services' Aircraft Capital Trust and India's Mytrah Energy's up to $400 million listing.
Cornerstone investors including fund managers Eastpring Investments and Myriad Asset Management, as well as hedge funds D.E. Shaw and Citadel, agreed to buy $122 million worth of the units, according to the prospectus.
Citigroup and DBS Group Holdings are managing the deal.