Amid an improvement in market conditions in Singapore, roadshows begin on Tuesday for a S$758.5 million to S$782 million (US$609 million to US$628 million) initial public offering by Accordia Golf Trust, a golf course-backed spin-off from Japan’s Accordia Group.
The IPO, lead managed by Citigroup and Daiwa, is being brought to market just as interest in Singapore's real estate investment trust sector perks up, with Frasers Hospitality Trust on course for a successful listing and German property group I-REIT Global looking to follow suit.
The Accordia Golf deal has a very heavy slant towards Japanese retail investors, which are being offered 576.3 million units through a Japanese Public Offer Without Listing. This accounts for 73.7% of the base deal size, according to a term sheet seen by FinanceAsia.
A further 41.2 million units are on offer to Singaporean retail investors, leaving institutions with the remaining 164.6 million, or 21% of the base deal size. Pricing is scheduled for July 24, with listing due on August 1.
On completion of the offering, Accordia Golf will hold a 25.1% stake assuming the greenshoe is exercised. In turn, the trustee manager is 49% owned by Accordia and 51% by Daiwa Real Estate Management.
The deal is being marketed on a price range of S$0.97 to S$1 per unit, which pitches the deal just below the mid-point of its pre-marketed range of $576 million to $720 million. At this level, it has been valued on an estimated 2015 dividend yield of 6.8% to 7%.
The listing company's portfolio comprises 89 golf courses of which 86.4% lie within Japan’s three largest metropolitan hubs: Tokyo, Nagoya and Osaka. Gearing at the point of the IPO will stand at 30.2%.
Part of the IPO proceeds will be used to purchase the portfolio at a price of S$913 million to S$945 million (subject to the IPO's pricing). This compares to an independent portfolio valuation of S$753 million to S$1.006 billion.
The parent owns a total of 132 golf courses, making it Japan’s largest operator with a 5.5% market share. Last year, it successfully fought off a $468 million hostile takeover bid from smaller rival PGM Holdings KKK. The company was formerly owned by Goldman Sachs, which set it up as a vehicle for the golf course assets it purchased after Japan's protracted property slump.
Accordia was listed in 2006 and its shares have outperformed the Nikkei 225 so far this year, gaining 1.5% compared with a 7% drop in the benchmark index. The J-Reit sector has also outperformed the index over the same time period.
Yield hunger
One factor playing into Accordia’s favour is Japan’s ultra-low interest rate environment. As a result of this, local retail investors have shown a far greater preference for higher yielding Reits in recent years compared with foreign institutions, which have been more focused on price and net asset values.
With a dividend yield of 7% at the cheap end of the indicative range, Accordia Golf Trust is being pitched at a big discount to the J-Reit sector, where yields average about 3.7% on an estimated 2015 basis. Even at the cheaper end of the scale, J-Reits such as SIA REIT and Mid REIT are trading at 5.7% and 5.1%, respectively, on a 2015 basis.
But it is not being pitched at a discount to two other Singapore-listed and Japanese-oriented Reits – residential property landlord Saizen and retail property specialist Croesus. These are yielding 6.7% and 8.3%, respectively, on a 2015 basis.
Further down the line, a German office property trust called I-REIT Global has begun seeking cornerstone investors for a Singapore listing that could raise up to $300 million and is led by Barclays and DBS.
