Prime US REIT launches Singapore IPO to raise US$813 million

U.S. one-dollar currency notes; taken September 2018.U.S. one-dollar currency notes; taken September 2018.

Prime US REIT has filed for a Singapore IPO to raise US$813 million, making it the largest new offering on SGX so far this year, KBS US Prime Property Management, the REIT’s manger, said in a statement Monday.

The IPO was priced at US$0.88 a unit, or S$1.20 a unit for the Singapore public offer, the statement said.

The offering has already seen strong support from nine cornerstone investors, including subsidiaries of Keppel Capital and Singapore Press Holdings, raising US$317 million, the manager said.

“We are delighted with the strong response to our IPO, with firm support from prominent cornerstone investors and high net worth individuals. This is indeed a vote of confidence in our portfolio and its visible growth potential underpinned by built-in rental escalations and rental reversion potential as well as inorganic growth potential,” Barbara Cambon, CEO and chief investment officer of the REIT manager, said in the statement.

“Our high-quality portfolio of prime office properties is well-diversified and strategically located in nine primary markets in the U.S. that are in the ‘landlord-favourable’ part of the office market cycle, where rents continue to grow, backed by robust economic and employment growth,” she added.

Analysts have recently turned more positive on Singapore REITs, as the U.S. Federal Reserve has reversed its policy guidance. Previously, expectations interest rates would rise damped interest in REITs, but with the Fed now signalling rates are on hold and with markets pricing in interest rate cuts, REITs now appear more attractive to yield-hungry investors.

“Against a more favourable backdrop of accommodative interest rates and dovish rhetoric, we expect S-REIT share prices to be well supported,” CGS-CIMB said in a note last week. “Low interest rates could also translate to potential interest cost savings or lower-than-expected interest costs on loan refinancing.”

That could be a positive sign for how receptive the market will be to Prime US REIT’s IPO, which will likely be keenly watched after two other U.S.-focused REITs, Eagle Hospitality Trust and ARA US Hospitality Trust, stumbled on their debuts in May.

The public offering opened on Monday and is set to close on 15 July, with trade due to begin on 19 July the statement said. The IPO is subject to an over-allotment option, the prospectus said.

The proceeds are earmarked for paying for the properties in the portfolio and working capital, the prospectus said. The 11 office-property portfolio has 96.7 percent occupancy and an appraised value of US$1.2 billion.

The top-10 tenants include Goldman Sachs, Wells Fargo Bank, Charter Communications and Apache Corp., and make up around 43.5 percent of cash rental income, the prospectus said.

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