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Perennial China Retail Trust plans to raise S$776.2m from IPO (27 May 2011)

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Uploaded by on May 27, 2011

Perennial China Retail Trust plans to raise S$776.2m from IPO
By Rachel Kelly | Posted: 27 May 2011 1740 hrs

SHENYANG, CHINA: Perennial China Retail Trust (PCRT) plans to raise S$776.2 million in gross proceeds from what is set to be the third largest initial public offering (IPO) in Singapore this year.

Funds will be raised from the offer and the issuance of sponsor units as well as cornerstone units, with units priced at S$0.70 each.

The business trust will develop retail space in China. Analysts say that increasing competition in the market could be a challenge.

The trust's initial S$1.1 billion property portfolio comprises five properties, which are expected to have a gross floor area of approximately 960,000 square metres. They are in Shenyang, Foshan and Chengdu.

PCRT has secured options to invest in a number of commercial development sites which are directly connected to High-Speed Railway stations. These pipeline assets are collectively worth around S$3.0 billion.

Pua Seck Guan, CEO of Perennial China Retail Trust Management, said: "Among all the markets that I'm familiar with, I think that China offers the most exciting and best potential. The reason being, one, today you can get real estate at a very attractive price, and you can see the yield that you can get. Therefore you can see the arbitrage of the physical market value into a capital market.

"And they have a huge growth. Every year, the growth is 10 over percent. Even if you make a slight mistake of a few percent, in 2-3 years' time, your mistake is wiped out. I think that puts people in a very advantageous position to enjoy the growth."

However analysts said that the high number of international firms eyeing the market could cause a challenge.

When it comes to location in an increasingly competitive market, customer catchment is key. Around 20 million customers are within an hour's radius of Longemonte Asia Pacific City, which also has strategically-located bus and metro stations.

PCRT expects to provide an annualised distribution yield of 5.30% for forecast year 2011 and 5.51% for projected year 2012, with rental yields expected to grow in the double digits as the consumer market expands.

Frederic Neumann, chief Asia economist & co-head of Asian economic research at HSBC, said: "There is tremendous pent-up demand for consumer spending in China. In the very short term, there are signs of a bit of a cool down in retail spending. One is because the government has withdrawn tax incentives for purchasing cars, so that's weighing on retail sales a bit.

"The cool in property sectors also helps to cool furniture sales etc. but underlying demand remains fairly robust."

The business trust is offering about 564 million units for its listing on the Singapore Exchange.

The trust is expected to start trading on the Singapore Exchange on 9 June.

CNA/cc/ir

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