They took up 19% of Reit; 68% of units went to foreign investors
By PAULINE NG
SINGAPOREAN investors took up nearly a fifth of Malaysia's soon-to-be-listed RM513 million (S$229 million) Starhill Reit, demonstrating a strong appetite for solid-yielding real estate investment trusts (Reits).
Property consultants say investors were attracted to Starhill's secure Reit income, possibly because they are familiar with the shopping malls and hotel to be injected into the trust.
Despite less-than-enthusiastic local interest, Starhill Reit's initial public offering attracted an oversubscription rate of nearly 9 times. That 68 per cent of the 509.6 million units was snapped up by foreign investors also underscores the belief foreign investors have in YTL Corporation, which owns the assets to be injected into the Reit. Post-listing, YTL will own 51 per cent of the Reit.
According to an article posted by FinanceAsia.com on YTL's community website, local investors took up 32 per cent of the offering.
UK investors topped the foreign portion at 20 per cent, only marginally ahead of Singaporean buyers, who accounted for 19 per cent. The rest of the units were split between Hong Kong (11 per cent), Europe (10 per cent), and 8 per cent to other countries.
At RM1.01 per unit for institutional investors and RM0.96 for domestic retailers, the Starhill Reit will yield over 6 per cent. Foreign investors were not deterred by Malaysia's 28 per cent withholding tax on non-residents.
In any event, the Reit - which begins trading on Bursa Malaysia on Friday - is committed to paying out all of its earnings in financial years 2006 and 2007. 'It's attractive for investors even at 5-5.5 per cent,' said Zerin Properties chief executive officer Previndran Singhe. 'People aren't investing in it so much for growth as for the recurring income.'
Another reason for the large foreign interest in the Starhill Reit is the 'YTL factor', he added. 'Everyone also wants to invest in a part of YTL, which probably has one of the most cash-rich businesses in Malaysia. Furthermore, Tan Sri is taking a personal interest in the Reit,' he said, referring to YTL Corp MD Francis Yeoh.
Over the years, Mr Yeoh has successfully expanded the construction company founded by his father Yeoh Tiong Lay into one of Malaysia's biggest conglomerates with interests in utilities, hotels, property, cement and technology.
One of Mr Yeoh's smartest moves was to acquire at fire-sale prices the property assets being injected into the Starhill Reit - a portfolio comprising the Lot 10 Shopping Centre, the recently refurbished Starhill Gallery and the adjoining JW Marriott Hotel. The Starhill Gallery used to house the Malaysian outlet of Singapore's CK Tang, which was later shuttered owing to poorer-than-expected sales. The property was sold to YTL Land in 2003 for RM77 million.
After the Asian financial crisis brought property company Taiping Consolidated to its knees, YTL Corp stepped in and took control of Taiping Consolidated via a reverse takeover of the company, which it later renamed YTL Land & Development. The three Starhill Reit-bound properties were purchased for RM323 million but are now worth some RM1.2 billion. Investors are obviously counting on Mr Yeoh and YTL Corp and its war chest of over RM5 billion to grab more assets should the opportunities arise again.
Mr Yeoh has said that 80 per cent of the proceeds raised from the Starhill Reit would be used to acquire more property assets in Malaysia, as well as in the UK and America. 'There is an abundant supply of properties that could fit into the Starhill brand in Malaysia and other countries. We won't run short of appropriate properties to fit into Starhill Reit.'
A 70 per cent owned unit of YTL Corp, Pintar Projek, will manage the Starhill Reit and has said it plans to establish Starhill shopping centres in a number of cities in the region.
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