News started circulating some time back that a new REIT will be listed on SGX, comprising of properties from a company called Lendlease. This was the first time I came across this name and to my surprise, their portfolio of properties include Parkway Parade and 313@Somerset.
Subsequently, there wasn’t much news or information about the listing and I pretty much forgot about it until the prospectus was lodged and a full page advertisement was published on the Business Times with the numbers 5.8% and 6.0% printed in rather big fonts.
Initial Public Offering
Forecasted Yields of Lendlease Commercial REIT
5.8% distributions is not fantastic but is a reasonable figure for a REIT by a credible sponsor such as Lendlease. Comparatively, other US hospitality and office REITs that ipo-ed this year claimed distributions of 7-8%, which makes 5.8% seem boring. Furthermore, the 5.8% is not a guarantee as mentioned in the prospectus.
Nevertheless, I have more faith in our local shopping malls than the US properties. Hence I decided to participate in my first ever IPO, despite my usual practice of not subscribing for any IPOs (It’s Probably Overpriced). Looking at past trends of companies that IPO on SGX, many have flopped badly due to low liquidity or poor demand (Kimly, Sasseur and EHT).
Sidenote: Sasseur REIT has managed to beat their IPO distribution forecast which is a pleasant bonus. However, the share price is still lazing around the IPO price. Personally not holding Sasseur.
Subscribing to the IPO
It is common for IPOs to be overscribed and there will be balloting to determine who gets the shares. From the IPO results of EHT and Prime REIT, the probability of successfully balloting for shares was about 50% at the bracket which I am looking at (<10000 shares). Upon successful balloting, applicants were issued 1000 shares.
Therefore, extrapolating the results, I predicted that given the strong retail interest on this IPO, chances are probably lower. In order to grab a larger slice of the pie, I should ballot for >10k shares, somewhere in the ballpark of 1,000,000 shares to have a higher chance of success.
$$$
As a student with zero income, forking out cash to subscribe for 1M shares is as ridiculous an idea as borrowing money from a bank at 5%pa to buy Bitcoin. Do-able, but not advisable given the risks involved.
Balloting Day
I must have checked my bank balance more than 3 times on Tuesday, hoping not to see the figure spike significantly. Ironic, given how I wish for the opposite most of the time. To my dismay, the money was refunded, which meant that I was one of the unsuccessful applicants.
Results
Digging into the results, turns out that for shares below 10000, the probability of success was 3 in 5, or 60% odds. So I happen to be in the minority 40%. Well all is not lost, I can always buy on the open market once the REIT starts trading right? If the share price flops, I could even buy in at a lower price than the IPO price. However, there was always the possibility that the share price will pump instead given that it is 14.3x overscribed.
The Ship is Really Gone
Pre market prices indicated that JYEU (Lendlease Commercial REIT stockcode) was going to trade at around 93 cents. I blinked to confirm that my eyes did not see 8 as a 9. Yup, says on the screen 93 cents.
At the strike of 2pm, trading commenced and the share price shot up to 94.5 cents at one point, marking a >5% return! The price stablised at 93 cents with a trading volume significantly higher than most other companies, other than Yangzijiang which is still so actively traded after a few weeks.
Perhaps in the future, upon news of a rights issue or otherwise, the share price might return to near IPO prices. Or it might even shoot past $1.05 to match the P/B ratios of it’s peers. Nobody knows but I will definitely be monitoring for a suitable entry.