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Capital Markets

Singapore’s first independent Reit: Creim-ing IT

Further welcome signs that Asia’s real estate investment trust investors are getting more choosy arose in July when Cambridge Industrial Trust relaunched its stalled IPO in Singapore with an enhanced yield to persuade punters to subscribe.

CIT, pitching itself as Singapore’s first independent Reit, was forced to pull its original offer in June after investors baulked at the 6.5% prospective yield, which compared with comparable yields for other Singapore-listed Reits of about 6%. It is an industrial warehousing and logistics play, so investors presumably wanted to see more yield than is paid on traditional office and retail Reits.

“Being the first independent Reit is a positive and a negative,” says Richard Taylor, senior managing director and head of equity capital markets at co-sponsor CLSA. “The independence of the Reit makes it interesting to some investors but the absence of a sponsor also concerned others.”

To close the deal, CIT’s sponsors, ABN Amro and CLSA, resorted to some fairly simple financial engineering, increasing CIT’s gearing and reducing the amount of capital raised from strategic investors. The result was a prospective annualized dividend yield of 7.71% for 2006 and 2007, assuming that the greenshoe is not issued. At almost 200 basis points over comparables, that proved enticing enough for investors – just.

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