Eagle Hospitality REIT's IPO falls flat as investment banks pick up slack

Investors subscribed to less than half of its stapled securities.

Despite being the largest IPO on the Singapore Exchange (SGX) in 2019 to date, Eagle Hospitality Real Estate Investment Trust’s (EH REIT) initial public offering (IPO) saw less than half of its stapled securities subscribed under the public offer, resulting in the joint bookrunners and underwriters having to take up the bulk of the allotment of unsubscribed securities, a disclosure with the local bourse revealed.

Of the 580.56 million staples securities offered at US$0.78 apiece, 44.87 million stapled securities were offered to the public in Singapore.

DBS Bank, which acted as the sole financial adviser and issue manager, a joint global coordinator, a joint bookrunner and underwriter for the offering, was allocated 12.64 million stapled securities, followed by joint global coordinator, joint bookrunner and underwriter Merrill Lynch (Singapore) with 4.3 million stapled securities.

UBS AG, Singapore Branch and BNP Paribas, acting through its Singapore branch, were each a joint global coordinator, as well as a joint bookrunner and underwriter. Deutsche Bank AG, Singapore Branch, and Jefferies Singapore, were also joint bookrunners and underwriters for the offering. BNP paribas, Deutsche Bank and Jefferies Singapore were each allocated 1.77 million stapled securities.

A portion or 535.69 million of the unsubscribed stapled securities was also re-allocated to the international placement, also known as the placement tranche, the stapled group’s managers noted.

The stapled group is expected to start trading on the SGX-ST on a ‘ready’ basis at 2 p.m. on 24 May.

In 2018, Singapore’s IPO performance disappointed after reaching a mere $730m across 15 IPOs on the Singapore Exchange (SGX) compared to the $4.7b reached with 120 IPOs in 2017, according to PwC’s Equity Capital Markets Watch report. Of the $730m, $560m was raised on the Mainboard whilst the Catalist Board raised $170m, the report noted.

“REITs and business trusts (BTs) continues to be the strength of the Singapore bourse with $422m in proceeds,” PwC Singapore stated. “As of 19 December, there are a total of 48 REITS and BTs listed in Singapore with a combined market capitalisation of $91.7b.”

Also read: S-REITs hit average total returns of 13.6% in 2019 YTD

Globally, the IPO market felt the consequences of trade and geopolitical tensions as the number of IPOs decreased from 1,081 to 870 for YTD 30 September, the report noted.

Going forward, the report stated that the SGX will continue to pursue several other initiatives to maintain its competitive position in the region and improve the attractiveness of its bourse. “We foresee that SGX will continue to attract listings in its niche sectors such as REITs & BTs, healthcare and F&B given the pro-business environment in Singapore pillared by strong government support besides the various initiatives undertaken by SGX,” PwC Singapore said.

In April 2019, ARA US Hospitality Trust lodged a prospectus for its IPO, making it the first listed US hospitality trust on the SGX. For 2019, the trust is projected to post net property income (NPI) of US$42.3m and a distributable income of US$26.1m.