IndiaBulls – OCBC
Indiabulls Properties Inv
New Indian property trust on SGX. Indiabulls Properties Investment Trust (IPIT) is a business trust focused on office spaces in India. This is the second India-centric trust on SGX after Ascendas India Trust. IPIT is sponsored by Indiabulls Real Estate Ltd, one of India’s largest property developers. As per its public listing on the SGX Mainboard, IPIT is offering 262.5m shares, priced between S$1.00 and S$1.10. At the same time, IPIT is issuing cornerstone1 units and consideration2 units that will partly fund the purchase of the initial portfolio. All in, IPIT will raise S$2592.2m in gross proceeds, based on the S$1.10 price.
Two Mumbai properties. IPIT will use the IPO proceeds to acquire two properties in Mumbai, India – One Indiabulls Centre and Elphinstone Mills – which are slated to be ready by 30 June and end 2008 respectively. The properties are designed for IT and financial firms, and together offer 3.3m square feet of office space. One Indiabulls Centre also features 438,000 sf in retail space and has a residential component as well. The two properties are characterized as Grade A and Knight Frank values them at S$4,368m in total. IPIT will pay S$2559.2m in cash and units.
Large pipeline, no gearing limit. IPIT sees great opportunity in the Indian office market, which is currently seeing 98-99% occupancy levels. Mumbai is said to be the fourth most expensive city in the world in terms of office rents, with Singapore coming in at number nine (CB Richard Ellis). IPIT’s sponsor has granted the trust a Right of First Refusal (ROFR) for five other properties. While structured as a business trust – which has no gearing limit – IPIT says it will limit its gearing to 35% by 31 Mar 2010 (or 60% if it obtains a credit rating). This puts IPIT on equal footing with the S-REITs.
4.7% to 5.1% DPU yield projected for FY09. The trust is projecting an FY09 dividend yield of 5.1% and 4.7% based on the minimum and maximum offering price of S$1.00 and S$1.10 respectively. This yield assumption is based on certain entitlement and subordination agreements. Without those agreements, FY09 yield comes to 2.6% to 2.9%. For FY10, IPIT is projecting a 8.9% to 9.8% yield based on the IPO price range. Ascendas India Trust, its closest comparable, is trading at a 6.5% yield. Meanwhile, the last two REITs to list in Singapore – Lippo Mapletree Indonesia Retail Trust (Indonesia) and Saizen REIT (Japan) – are currently trading at deep discounts to their IPO prices. We do not have a rating on the stock.
1 Cornerstone investor: Wellmark Investments Ltd (91m common units)
2 The consideration units will partly fund the acquisition of the initial portfolio. They comprise of 504.9m common units and 1,498.2m subordinated units (their entitlement to distributions is subordinated to common units for FY09 and FY10).
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