Singapore's first Reit IPO in two years raises $299 million

Cache Logistics Trust has raised S$417.3 million ($299 million) from the largest Singapore initial public offering since CapitaLand spun off its Asian shopping mall business in November last year. It is also the first real estate investment trust of size to go public in Singapore since November 2007, although Indiabulls Property Investment Trust, which listed in June 2008, had Reit-like qualities, including a commitment to pay out at least 90% of its distributable profit and a cap on its gearing ratio at 35% (60% for Reits with a credit rating).

Investors were attracted to Cache because of its high-quality properties in good locations, as well as a higher yield than its two closest comparables. The company was able to fix the price at the top of the S$0.84 to S$0.88 range. According to sources, approximately 200 institutional investors participated in the offering, which was said to have been "well oversubscribed". Most of the demand came from Asia and comprised high-quality institutional investors, with the addition of a few momentum hedge funds towards the end of the bookbuilding when it was clear that the deal was going well.

At the final price, Cache offered a dividend yield of 8.7% for 2010 and 8.82% for 2011, which was significantly above Ascendas Reit's 7.1% and Mapletree Logistics Trust's 6.9% for the current year. However, in relation to net asset value, Cache's valuation at about a 1% premium was largely in line with that of Mapletree.

The IPO comprised approximately 474.1 million units, of which 433.1 million or 91.4% went to institutional investors. The remaining units were set aside for retail investors and management, employees, and business associates of the sponsor and the management company. Thanks to strong interest from employees, the latter portion was increased to 14 million shares from 11 million initially, meaning the retail portion, which opened last Thursday and will close on April 8, was reduced to 27 million (or 5.7% of the total deal) from 30 million.

In addition to the IPO, Cache will also sell 56.901 million units, or 9% of the trust, to two cornerstone investors - JF Asset Management and Morgan Stanley Investment Management - allowing it to raise a total of S$467.3 million ($334 million).

The cornerstones and the investors who participated in the IPO will own a combined 84.1% at the time of listing, which is expected to be April 12. CWT Limited, which is the sponsor, will hold 12.2%; C&P Holdings, a privately-owned logistics company in Singapore, will own 1.9%; ARA Asset Management, a real estate fund management company which owns 60% of the Cache Reit management company, CWT-ARA Trust Management (Cache), will have a 1.9% stake. (The rest of the management company is owned by CWT.)

Cache currently operates six income-producing logistics warehouse properties in Singapore that it leases from CWT and C&P. They have a gross floor area of more than 3.9 million square feet, a weighted average lease term of 6.4 years, and strategic locations around logistics clusters near Changi airport, the Jurong port and the port facilities owned by PSA Singapore Terminals. The assets include the CWT Commodity Hub, which is the largest warehouse in Singapore and more than 97% of the GFA is comprised of so called ramp-up warehouses.

Part of the attraction of the offering was the fact that Cache has a right of first refusal to buy logistics properties in the Asia-Pacific region that are either owned by or offered to CWT and its substantial shareholder C&P. CWT and C&P currently owns properties with a combined GFA of more than 2.9 million sqf in Singapore and China.

The deal was arranged by DBS, Macquarie and Standard Chartered.