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Croesus Retail Trust.

Wednesday, July 4, 2012

"Croesus Retail Trust is planning a Singapore initial public offering of about $800 million (US$634.22 million), backed by mainly Japanese assets, IFR reported on Wednesday."

It is an interesting choice of name. Croesus was the wealthy King of Lydia (part of modern day Turkey) and in Greek culture, the name is synonymous with a wealthy man. Would the REIT live up to its name?

Although I find this REIT interesting, I am not too excited about it at least for now because I remember Starhill Gobal REIT's Japanese retail properties to be a drag on its performance. The lacklustre Japanese economy has caused its retail sector to decline year after year.

Unlike demand for housing which is rather inelastic (which is a reason for liking Saizen REIT), demand for retail spaces is very sensitive to a country's economic performance.

This was what Starhill Global REIT's management said in its 2011 Annual Report:

The Japanese retail environment remains challenging. The Manager is continuously optimising asset performance through active management of the leases.

Let us wait for more details.


Ray said...

I have a feeling price will drop after IPO. It's not a good time to float your company now. Just look at Facebook. ;)

AK71 said...

Hi Ray,

I don't know how Mr. Market would react to this although I am not too keen on it.

Having said this, it could be a good investment at the right price, just like everything else unless it is a basket case. ;)

Musicwhiz said...

Japan real estate? One earthquake or tsunami is all it takes to permanently impair the value of your properties.

It's a risk I won't like to take!

AK71 said...

Hi MW,

Well, Saizen REIT survived the triple disasters of last year rather well. Few places are lucky like Singapore to be free from natural disasters. :)

AK71 said...

06:56 PM Oct 24, 2012

HONG KONG - Croesus Retail Trust (CRT), which focuses on retail real estate in Japan, has started pre-marketing a Singapore initial public offering of about S$800 million, a source with direct knowledge of the plans said on Wednesday.

The trust, which is part-owned by Marubeni and Daiwa House Industry, is pitching the deal to investors at an indicative yield in the high 7 per cent range for fiscal year 2013 and in the low 8 per cent range for fiscal 2014, added the source.

Citigroup and DBS Group Holdings are managing the deal. REUTERS

AK71 said...

Croesus Retail Trust, a real-estate investment vehicle backed by Marubeni Corp and Daiwa House Industry Co., has priced its planned initial public offering at 93 cents per unit, people with knowledge of the deal said Wednesday, setting up a flotation worth about US$300 million ($373 million) in Singapore.

If Croesus’ IPO is successful, it would become the first Japanese company focused on retail property to list in Singapore, and the second Japanese company after Saizen REIT, which listed its residential properties in a 2007 share sale that raised about $197 million.

Dow Jones & Co, Inc
Wednesday, 24 April 2013

Zaanan said...

Hi AK,
Any thoughts on the IPO now?

AK71 said...

Hi Zaanan,

I am still of the opinion that IPOs are probably priced to the issuers' advantage. However, with investors seemingly very enthusiastic about REITs, we could see the enthusiasm spill over to this IPO. Just my guess. ;)

AhJohn said...

Hi AK, with 38% NAV discount and 8% yield, but 48% gear, seems still attractive.

AK71 said...

Hi Ah John,

I haven't looked at the numbers. So, thanks for sharing them here. :)

Although not strictly comparable, at 20c a unit, Saizen REIT's 20% discount to NAV, 6.6% distribution yield and 32% gearing seems like a more attractive offer.

Saizen REIT presentation, March 2013.

The devil is in the gearing level. CRT's 8% distribution yield seems attractive but the 48% gearing is what makes it possible.

If Saizen REIT were to gear up to 48%, all else remaining equal, we could see its distribution yield going up to 9.9%.

Having said this, in the current low interest rate environment, Mr. Market could respond positively to the IPO. :)

AK71 said...

Croesus Retail Trust, the first Asia-Pacific retail business trust with an initial portfolio located in Japan to be listed on the Mainboard of the SGX, said its IPO offer was 22.4 times subscribed. This was based on the total demand of 5,142,786,151 units for its offering of 229,118,000 units.

In the placement tranche, interest received for the 207,613,000 units amounted to 4,093,213,151 units. As for the public offering, 19,638 valid applications for 1,049,573,000 units were received for the 21,505,000 units available to the public for subscription.

The EDGE, 9 May 2013.

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