Chinese tycoon adds IREIT Global to S’pore portfolio

Chinese tycoon adds IREIT Global to S’pore portfolio

Investors seeking alternatives to park wealth as Beijing’s property market remains shaky

SINGAPORE — A Chinese tycoon plans to buy about 60 per cent 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.

Mr 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, the prospectus filed on Wednesday evening showed. The IPO aims to raise about S$372 million.

Mr Tong also bought more than half of Viva Industrial Trust when it listed in Singapore last year. Mr Tong is chairman of real estate developer Summit, best known for high-end hotel and shopping centre Longemont in Shanghai. Summit held total assets of 64.9 billion yuan (S$13 billion) at the end of last year.

“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 Mr Vikrant Pandey, an analyst at brokerage UOB Kay Hian.

The 15 per cent stamp duty the Singapore Government imposes on foreign buyers of properties also helps push investors to seek alternatives and REITs have been appealing, Mr Pandey added.

“For the high-net-worth individuals, the current 6-7 per cent REIT yield is pretty attractive,” he said.

IREIT Global has an initial portfolio of four office properties in Germany valued at about S$483 million. The four properties, located in Bonn, Darmstadt, Munster and Munich, have a total net lettable area of 1.31 million sq ft. IREIT Global said the four freehold properties are either recently built or refurbished. Therefore, it expects minimal capital expenditure on the buildings up to December 2016.

DBS Bank is sole global coordinator for the deal and is a joint bookrunner with Barclays.

Mr Tong’s holdings in nine Singapore-listed REITs add up to about US$780 million (S$968 million), Thomson Reuters data showed. He owns 64.75 per cent of Viva Industrial Trust, 4.58 per cent of Suntec Real Estate Investment Trust, 12.93 per cent of Cambridge Industrial Trust and 16.20 per cent of OUE Commercial Real Estate Investment Trust, among others.

Mr Tong is not alone in buying into Singapore’s REITs. Mr Gordon Tang, a Chinese national who heads Singapore-listed property developer Singhaiyi Group, stood side-by-side with Mr Tong as cornerstone investors in the IPOs 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 per cent so far this year, beating the 4 per cent gain in the benchmark Straits Times Index. Agencies