Sabana real estate investment trust (REIT), Singapore’s first syariah-compliant REIT, expects to acquire at least three more industrial assets in the country from its sponsor Freight Links Express Holdings in order to boost its portfolio.
The trust will raise $664 million from its IPO at $1.05 per share and offer a distribution yield of about 8.22 percent for 2011, according to its prospectus.
The REIT will rank as the world’s largest syariah-compliant REIT by asset size – ahead of the only three listed Islamic Reits in Malaysia, considering that it holds about 15 industrial assets in Singapore worth $850 million.
The distribution yield comes as the Reit enters an industrial trust market dominated by Ascendas and Mapletree. “We’re very aware that we’re an independent REIT; and based on market feedback, we need to pay a bit more,” said chief financial officer Eric Pascal in a briefing last week.
Kevin Xayaraj, chief executive of the REIT’s manager, said that Freight Links is currently negotiating with JTC Corporation to extend the current land tenure of its three industrial assets of under 20 years, making them unsuitable for the REIT. Once talks are completed over the next two months, the trust plans to acquire these properties, which include two chemical warehousing facilities, with the REIT having the first right of refusal for the three facilities.
Most of the trust’s IPO proceeds, as well as a drawdown of $221 million from a committed three-year commodity murabaha facility, would be used to pay for the properties in its portfolio.
Sabana REIT is also on the lookout for more acquisitions, especially in the high-tech industrial space that commands double digit rental premiums, added Mr. Pascal.
Majority of its forecasted gross revenue for next year comes from its high-tech industrial businesses at 58 percent.
Mr. Pascal said that any future acquisitions, which will target Singapore assets, should be funded by debt, with a long-term gearing target of around 40 percent.