Li Ka-shing Controlled ARA Mulls Yuan REIT IPO In Singapore - Sources
03/20/2012| 03:48am US/Eastern
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--ARA Asset Management mulls yuan REIT IPO in Singapore - sources
--ARA plans to put dragon fund II assets in Singapore IPO - sources
--IPO if successful will be the first yuan REIT in Singapore
(adds details on yuan market in fifth, sixth paragraphs, performance of Hui Xian REIT
REIT in seventh paragraph, background in eighth, ninth paragraph, ARA's portfolio in
10th paragraph)
By P.R. Venkat
Of
Singapore-listed real estate fund manager ARA Asset Management Ltd. (D1R.SG), an affiliate of Hong Kong tycoon Li Ka-shing's Cheung Kong (Holdings) Ltd. (0001.HK), is exploring the possibility of a yuan-denominated initial public offering of some of its Asian assets in Singapore this year, people familiar with the situation said Tuesday, in what would be the first IPO in the city-state in the Chinese currency.
ARA, which manages real estate trusts with properties in China, Singapore, and Hong Kong, is looking into a yuan-denominated real estate investment trust listing of assets in its Dragon Fund II, which has a portfolio of real estate assets across Asia, the people said. One of the people familiar with the deal said that ARA's plans are at an early stage, however, and the exact timing as well as the assets have yet to be finalized.
A plan to do a yuan-denominated IPO in the city-state comes as Singapore positions itself as an alternative destination to Hong Kong in the offshore yuan market, which has been growing as Beijing internationalizes its currency. If it goes ahead, ARA's planned yuan IPO will only be the second denominated in the Chinese currency outside mainland China. Li, one of the richest men in Asia, held the only other yuan-denominated IPO outside China last year in Hong Kong--the US$1.6 billion IPO of Hui Xian REIT (87001.HK)--which has stakes in Beijing office properties and is also managed by ARA.
Singapore property developer Ascendas Group had plans to list its Chinese property assets through a yuan REIT IPO in the second half of last year but that fell through due to adverse market conditions, people familiar with the situation said. Ascendas hasn't revived those listing plans since.
Getting a yuan IPO done in Singapore will be a challenge, however, given that its pool of yuan is much smaller than Hong Kong's, which has a thriving market in yuan-denominated debt securities, dubbed dim sum bonds.
At the end of January, yuan deposits in Hong Kong totaled CNY576 billion, according to the Hong Kong Monetary Authority, jumping fivefold from July 2010, when Chinese authorities relaxed key rules for yuan's circulation in Hong Kong. According to analysts at Deutsche Bank AG, Singapore has between CNY40 billion and CNY50 billion in bank deposits. A spokeswoman for the Monetary Authority of Singapore had said earlier that the agency doesn't track yuan-deposit totals. A person familiar with the matter said that the Hong Kong stock exchange, which is keen to do more yuan-IPOs, will likely try to win the IPO back from Singapore, its archrival.
The track record of Li's other IPO, the Hui Xian REIT, hasn't been strong, however, since listing, as investors shy away from stocks with an insufficient pool for secondary trading and Hong Kong investors generally don't have a big appetite for investment products that focus on stable income. Hui Xian shares have been trading under water since they listed in April last year, and are now down around 24% below their IPO price, while Hong Kong stocks are down 12% in that time.
But interest rates on yuan deposits are low so yuan-holding investors looking for yield will be attract to the prospect of steady dividends from a REIT IPO. On top of that, unlike Hong Kong, Singapore has a strong tradition in trust listings and a well-established investor base that like steady dividend-paying investment options.
Of the US$7.6 billion in Singapore IPOs last year, US$6.9 billion was raised through business trusts and REITs, including Li's US$5.5 billion IPO of Hutchison Port Holdings Trust (NS8U.SG) and a $764 million REIT by Mapletree Commercial Trust (N21U.SG).
ARA manages real estate-focused private funds, as well as REITs listed in Singapore, Hong Kong and Malaysia with diversified portfolios in retail, office, industrial and logistics segments. Apart from the Dragon fund and Hui Xian REIT, ARA manages Singapore-listed Suntec Real Estate Investment Trust (T28.SG), and Hong Kong and Singapore listed Fortune Real Estate Investment Trust (F25.SG, 0788.HK).
ARA officials weren't immediately available for a comment.
--By P.R. Venkat, Dow Jones Newswires; +65 64154 152; venkat.pr@dowjones.com
--Prudence Ho and Fiona Law in Hong Kong and Chun Han Wong in Singapore contributed to the report
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