Malaysia Starhill REIT +7.3% in strong debut
Yahoo! News, December 16, 2005
KUALA LUMPUR (Dow Jones)--Starhill REIT (5109.KU) rose 7.3% from its retail initial public offer price in its debut on Malaysia's stock exchange Friday, amid strong demand for the country's first real estate investment trust, or REIT, to focus on malls.
Starhill, which is Malaysia's biggest real estate investment trust, ended at MYR1.03, compared with its retail IPO price of MYR0.96. A total 97.9 million units changed hands Friday, accounting for 31% of Bursa Malaysia's total volume.
The offering for the country's first mall REIT coincided with Malaysia's first interest rate increase in seven years, raising local investor concerns that the REIT's yields would fail to attract investors, analysts said.
Starhill has dismissed these concerns, noting the high foreign interest in the offer. The interest comes despite Malaysia's tax regulations on REITs being less transparent than those of countries such as Singapore. Malaysia taxes REIT income at the end-investor level, while Singapore doesn't.
Starhill - which pools Lot 10 and Starhill Gallery malls and the J.W. Marriott hotel - is Malaysia's second REIT created under new regulations for the instrument, which give the funds a more transparent tax structure and remove a property capital-gains tax.
REITs, financial instruments for investing in real estate, have won many supporters since their introduction in Asia, mainly due to their relatively high yields and steady income. Japan, Australia and Singapore are Asian market leaders for REITs.
Starhill's IPO was 8.8 times subscribed when it closed Dec. 1.
"At 8.8 times subscribed, and with foreign investors bidding for about two-thirds (of the initial offer), the REIT is well-supported," said a senior industry executive.
Some 94% of the IPO units were sold to institutional investors via book-building at MYR1.01 each.
Starhill, Malaysia's first REIT to be marketed overseas in over a decade, also sold units to individual investors at MYR0.96 each. In total, Starhill sold 49% of the REIT, or 509.6 million units, raising about MYR513.2 million.
The diversified YTL Corp. (4677.KU) conglomerate, headed by managing director Francis Yeoh, controls 51% of Starhill post-IPO. Pintar Projek Bhd., a 70%-owned YTL unit, will manage the REIT.
Starhill has committed to paying out 100% of its earnings in dividends in 2006 and 2007. At MYR1.03 a unit, the REIT will yield about 6.1%, significantly higher than 12-month term bank deposit rates of 3.7%.