Perennial China 1.6 times subscribed

PERENNIAL China Retail Trust (PCRT) has raised $776.2 million from its initial public offering. At the close of its IPO, its institutional placement and public offer tranches were 1.6 times subscribed.

PCRT had initially planned to list earlier at about $1 a unit to raise some $1.1 billion but plans were put on hold in March, reportedly due to volatile market conditions. When plans were revived, its units were priced at $0.70.

PCRT had earlier secured eight cornerstone investors who subscribed for 516.65 million units. With additional units subscribed by cornerstone investor Shanghai Summit and the subscription by sponsor Perennial Real Estate under the placement tranche, these parties hold about 60.8 per cent of PCRT on the IPO’s completion.

The total offering of $776.2 million for subscription at $0.70 per unit comprised 545.221 million units (49.2 per cent of the offering) from the cornerstone investors and sponsor, while 511.451 million units representing 46.1 per cent had been placed out to international investors; and 52.128 million units (4.7 per cent) placed out to the public in Singapore.

Perennial China Retail Trust Management CEO Pua Seck Guan said: ‘We are very pleased with the warm reception that investors have given us, despite tough market conditions and a subdued appetite for new listings. We are especially encouraged by the strong support from real estate specialists, long-only funds and private wealth funds who account for over 80 per cent of the offering.’

He also went on to add that PCRT is well positioned to benefit from retail growth opportunities in China, which would allow it to provide unitholders an ‘attractive total return of strong net asset value growth and stable distributions’.

The balloting outcome for the public offer will be released today while the PCRT units will commence trading at 2pm tomorrow.

Perennial on fast track

Singapore’s next big listing, Perennial China Retail Trust (PCRT), is hopping on board the transportation phenomenon that is sweeping over China. Plans for developments in high-speed rail are already underway across the country, such as the line between Beijing and Shanghai which cuts travel time in half.

PCRT may not be involved in the development of such tier one city stations but it does have second-tier cities in its sights.

The initial portfolio of the trust includes retail space connected to metro stations. The trust has also secured the option to invest in a pipeline of commercial development sites which are directly connected to high-speed railway stations in Chengdu and Xi’an. And with some 400,000 passengers expected to flow through Chengdu East Railway Station when it is completed, it is easy to see where the attraction and potential is for the retail developer and its partners.

Mr Pua Seck Guan, CEO of the Trustee Manager for PCRT, says that in an increasingly competitive environment, customer catchment is key, “I think it must be within the population catchment, well served by the transportation network, i.e. roads, MRT. I think these are very important because more than 60 per cent, 70 per cent of our customers come from means of transportation other than cars, so transportation network is very important.”

Mr Pua adds that he is already in discussions with other cities to develop retail and transportation models similar to PCRT’s current projects.

Industry players say that retail rentals in strategically located malls in Shenyang and Chengdu could climb at a pace of 10 to 15 per cent annually for the next eight years.

The bustling transportation hubs have also had an impact on the surrounding residential prices. For example, some experts note that residential property prices have doubled in value in the last two years in select areas surrounding new transportation infrastructure on the back of anticipated economic progression.

But while rental prices may be moving up at a rate akin to the high-speed transport they link too, market watchers say the verdict is not yet out on PCRT’s offerings. PCRT says yield for forecast year 2011 will come in at 5.30 per cent and 5.51 per cent for next year.

However, Mr Gabriel Yap, executive chairman at GCP Global, says: “The offer yields are even below 6.8 per cent yield of CapitaRetail China Trust, whose assets are in relatively better located areas in first and second tier cities in China.”

PCRT plans to raise S$776.2 million in gross proceeds from what is set to be the third-largest initial public offering in Singapore this year, behind Hutchison Port Holdings Trust and Mapletree Commercial Trust.

Funds will be raised from the offer and the issuance of sponsor units, as well as cornerstone units at 70 cents each. The business trust is offering about 564 million units and is expected to start trading on the SGX on June 9.

Perennial China to raise $776.2m in IPO

Firm confirms that its units will be priced at 70cents each

PERENNIAL China Retail Trust (PCRT) will be raising $776.2 million in gross proceeds from its initial public offering.

It confirmed yesterday that its units will be priced at 70 cents each – at the bottom of the indicative range of 70-76 cents. This is in line with what Reuters reported on Thursday.

‘We had a much stronger book at the lower range,’ said Pua Seck Guan, CEO of PCRT’s trustee-manager. By pricing units at that level, ‘we think we leave (a) few cents on the table . . . hopefully we give investors a better return’.

PCRT has been been on market watchers’ radar for several months. It was due to list earlier at $1 a unit to raise some $1.1 billion but plans were shelved in March, reportedly due to volatile market conditions.

But bad news, ranging from deepening sovereign debt problems in the eurozone and worries of slower growth in China, have continued to hit equity markets this month.

Based on the offer unit price of 70 cents, PCRT is expected to provide an annualised distribution yield of 5.3 per cent for Forecast Year 2011 and 5.51 per cent for Projection Year 2012.

The gross proceeds are expected to come from the offering of 563.6 million units and the issuance of sponsor as well as cornerstone units.

The 563.6 million units include around 52.1 million in a Singapore public offer, which opens today and closes on June 7. Trading is expected to start on June 9. There will also be an international placement of 511.45 million units.

Trust sponsor Perennial Real Estate will subscribe for $20 million worth of units for a 3.7 per cent stake.

PCRT’s IPO has drawn eight cornerstone investors, including CB Richard Ellis Global Real Estate Securities, Henderson Global Investors and Prudential Asset Management (Singapore). The eight will together own 46.1 per cent of PCRT.

PCRT will have an initial property portfolio of around $1.1 billion, comprising five assets in Shenyang, Foshan and Chengdu. These include Shenyang Longemont Shopping Mall and Shenyang Longemont Offices.

With the listing now on track, PCRT will be focusing on growth next. Mr Pua is looking to ‘very quickly activate’ the options to purchase two commercial developments projects which are directly connected to high speed rail stations in Chengdu and Xi’an.

Perennial China said to raise $784m in IPO

PERENNIAL China Retail Trust has raised $784 million in an initial public offering (IPO) that was postponed in March because of stockmarket volatility, a person with knowledge of the matter said yesterday.

The Singapore-based business trust is selling 1.1 billion units at $0.70 apiece, the bottom end of a range marketed to investors, the person said, requesting anonymity because the pricing hasn’t been publicly announced. Perennial, which owns Chinese malls, had marketed the units at $0.70 to $0.76.

The MSCI Asia Pacific Index fell to a two-month low on Wednesday as Greece’s debt crisis intensified, Japan’s economy contracted, and disappointing US economic data fuelled concern about the global recovery. In Singapore, Hutchison Port Holdings Trust – which completed Southeast Asia’s biggest IPO in March – has fallen almost 10 per cent below its offer price.

Perennial China is managed by Pua Seck Guan, former CEO of the manager of CapitaMall Trust, Singapore’s first property trust. CapitaMall shares posted a record decline in September 2008 after Mr Pua’s resignation.

The IPO includes five properties in Shenyang, Foshan and Chengdu, the company said in a prospectus filed last week. Perennial plans to use the funds raised to develop malls in China, and said investors in the offering will benefit from retail sales growth in the country.

The units are scheduled to start trading on June 8. – Bloomberg

Perennial China revives IPO, seeks $843m

Distribution yields are forecast by the trust to be up to 5.3% for 2011 and up to 5.5% for 2012

PERENNIAL China Retail Trust (PCRT) revived its stalled initial public offering yesterday, but on a slightly smaller scale – the business trust now aims to raise up to $843 million, down from the $1.1 billion it planned to raise in March.

This means that estimated yields are higher this time round. The trust is now forecasting annualised distribution yields of up to 5.3 per cent for 2011 and up to 5.5 per cent for 2012. Previously, PCRT projected yields of around 3 per cent for both 2011 and 2012.

Sponsor Perennial Real Estate, which is headed by former CapitaLand Retail chief Pua Seck Guan, had initially planned to launch the trust in March.

But the offering was delayed following international roadshows, with the trust citing volatile market conditions. PCRT was to have offered 1.09 billion units priced at $1 per unit. This would have raised about $1.1 billion in gross proceeds to be used mostly for the acquisition of five properties in China.

Mr Pua said then that the PCRT deal will be tweaked to current market conditions and brought to market as soon as possible.

BT understands that the revised offering is expected to be better received by cornerstone and other institutional investors. Among other things, Perennial was able to get discounts of between 3 per cent and 12 per cent off the prices of some properties it will acquire, sources said.

‘The new and higher projected annualised distribution yields are closer to that of most Singapore-listed Reits (real estate investment trusts) which will make PCRT more attractive to investors,’ said an analyst.

Perennial explained in February that PCRT’s estimated yields were lower than comparable Reits’ or business trusts’ mainly because there will be only one completed and leased-out property at the time of listing.

The rest are in pre-leasing stage or under development. The trust instead offers attractive total returns (yield plus net asset value growth).

‘(There is the) potential to quadruple asset base on cost of acquisitions alone,’ said a term sheet sent to potential investors, which was seen by BT.

In addition to the initial portfolio of five properties, PCRT has firm options to acquire 50 per cent of at least one million square metres of gross floor area each in high speed rail-linked developments in Chengdu and Xian.

In the revised prospectus submitted to the Monetary Authority of Singapore yesterday, PCRT said that it will now offer up to 1.09 billion units priced at 70-76 cents each.

It will sell up to 577.8 million units to institutional investors and the public, and another up to 516.7 million units to cornerstone investors such as Nan Fung Group, Asdew Acquisitions, AEW, Shanghai Summit, CBRE, Henderson Global Investors and Prudential.

Sources said that roadshows for the IPO started yesterday and will continue until May 25. The trust is expected to be listed on June 8.