New Reit – Kim Eng

New REIT in the making – Another property stock enters the spotlight. A news report today revealed that private developer Far East Organization (FEO) is said to be planning to raise at least $500m through the listing of its hotel and serviced residence assets in a REIT as early as next year. What is interesting is that one of the assets to be spun off into the REIT is Orchard Parade Hotel, owned by FEO’s listed entity, Orchard Parade Holdings (OPH). In fact, in a statement last evening, OPH confirmed that it is in preliminary discussion with FEO over the injection of assets into the REIT. Other assets owned by OPH include Albert Court Village Hotel near the upcoming Rochor MRT Station, and Central Square Village Residences along Havelock Road. Both would fit the REIT’s profile well. A possible scenario is the privatisation of OPH before the formation of the REIT next year. This is because the hospitality assets are worth an estimated $500m collectively, and that already makes up 90% of OPH’s current market capitalisation. We had earlier identified Orchard Parade as a potential privatisation target on the premise that the stock trades at a large discount to book and has substantial shareholders with deep pockets.