The Cromwell European REIT (CEREIT), which comprises office, retail and logistics assets in Europe’s mature economies, made its debut on the SGX Mainboard, trading at 0.55 euros on listing. On market close, this remained unchanged.
The public float of CEREIT on the Singapore bourse is the first-of-its-kind listing offering Asian investors an opportunity to invest in Europe’s real estate sector.
The REIT manager had offered 428.5 million units at 0.55 euros per unit. Its initial public offer (IPO) was subscribed 3.1 times, based on the valid applications received for 111.2 million units for the 36.5 million units available for public subscription.
IPO proceeds amounting to EUR 556 million ($659.5 million) will be used to acquire 60 more properties in these countries. Its IPO portfolio consists of 74 properties in or close to major gateway cities in Denmark, France, Germany, Italy, as well as the Netherlands, with a focus on the office and light industrial/logistics sectors.
Thomson-Reuters data indicates that the proceeds raised through initial public offers (IPOs) in Singapore are the largest since 2013, with companies having raised about $3.22 billion via public floats on the Singapore Exchange (SGX), which has a strong nucleus of REITs and property companies.
Sponsored by ASX-listed Cromwell Property Group, cornerstone investors which include Hillsboro Capital Ltd and Cerberus Singapore Investor LLC subscribed for 581.82 million units. UBS AG, on behalf of the joint bookrunners and underwriters, over-allotted an additional 45.5 million units to the placement tranche.
This listing was smaller than its initial plans, which called for an EUR 927 million ($1.09 billion) that was suspended. At the time, Cromwell had cited market conditions as a reason for suspending the listing.
In a statement, Philip Levinson, CEO of Cromwell EREIT Management, said, “As the first Singapore REIT with a diversified Pan-European asset base, we are delighted by the significant interest in our offering from the investment communities in Singapore and globally. CEREIT aims to provide our investors with access to improving European markets, as well as a geographically diverse and scalable portfolio of commercial and industrial properties.”
With a market capitalisation of about €866 million ($1.02 billion), the listing of Cromwell European REIT will bring the total number of SGX-listed REITs and property trusts to 43, with a combined market capitalisation of about S$88 billion ($65.1 billion).
Excluding Japan, the SGX is the largest REIT platform in Asia, with more than 70 per cent of SGX-listed REITs and property trusts owning assets outside of Singapore. Together with real estate companies, the overall real estate cluster has a combined market capitalisation of S$205 billion ($151.8 billion).
Strong trust performance
According to Deloitte, with the addition of CEREIT to the trusts listed on the SGX, proceeds raised by Trusts for the first 11 months of 2017 has increased more than two-fold year-on-year to hit a high of S$4.1 billion ($3.03 billion)
Proceeds from the overall Trusts market has improved from S$0.3 billion raised in 2015 to S$1.9 billion raised in 2016. To date, 20 Trusts have listed since the beginning of 2013, creating market vibrancy and raising a total of S$13.9 billion ($10.2 billion).
The city-state’s IPO market has been distinguished by the strong performance of trusts’, with Dr Ernest Kan, Deputy Managing Partner (Markets), Deloitte Singapore elaborating: “The Trusts market has delivered a strong average yield of 6.4%, outperforming the benchmark Straits Times Index’s 3.7%.”
“We have also seen an increase in capital flowing into the REITs and Trusts market in Singapore, evidenced by the oversubscription rate on the Trusts IPOs – NetLink NBN Trust was oversubscribed twice and Dasin Retail Trust seven times. We believe these factors have contributed positively to increases in both the number and size of Trusts listings on the SGX,” Dr Kan adds.
This strong performance has attracted a rush of foreign assets to list on the local bourse. Over the past five years, there have been a total of 19 Trusts listings. 13 of these Trusts including CEREIT have foreign-based assets, while the other six hold assets wholly or are primarily based in Singapore.
This has increased the diversity of asset classes on SGX, given the larger selection of counters to choose from across geographies and industries.
Dr Kan adds, “Trusts have generally appealed to investors on the SGX who are looking to hold their investments in the longer term and receive passive income from their investments.”
“Having acted as the reporting accountant for all three out of the four Trusts listings on the SGX in 2017 to date, we continue to see a steady pipeline and sustained interest in the market. With an average yield of 6.4% for all Trusts listed on the SGX, and a stellar performance in Singapore GDP at 5.3% in Q3 2017, 2018 will likely see greater performance in the Trusts market.”