Singapore’s first Shari’ah Compliant Real Estate Investment Trust (REIT) Sabana REIT will offer a rich distribution yield and raise up to $554 million from its IPO, according to its preliminary prospectus.
Sabana REIT would sell 504 million units excluding the 102 million units that have been subscribed by cornerstone investors, with each unit to be priced from $1 to $1.10 apiece.
The property trust would hold about $850 million worth of 15 industrial assets in Singapore, which makes it the world’s biggest REIT by asset value.
The REIT manager has estimated a distribution yield of 8.02 percent and 8.05 percent for 2011 and 2012 respectively, based on the $1.10 maximum offer price. In comparison, Mapletree Industrial Trust offered 7.6 percent in distribution yield for the fiscal year of 2010.
While high yields are attractive, analysts have cautioned that yield premium, which also suggests higher risks, may not be sustained for a long time.
The IPO offer comprises a placement of 428 million units to investors including institutional players, as well as 75.5 million units in public offering.
About 60 percent or 44.5 million of the public offering will be set aside for subscription by individuals related to the REIT’s sponsor, Sabana Investment Partners (SIP).
The 31 million units reserved solely for public subscription represent 6.2 percent of the total 504 million units being sold.