India’s DLF Assets plans Singapore property trust

India’s DLF Assets plans Singapore property trust

By Reuters

Mumbai: A sister firm of Indian developer DLF Ltd has hired bankers to arrange a property trust IPO in Singapore, a company official told Reuters on 19 September, in a deal worth as much as $2 billion (Rs8,047 crore)

The planned real estate investment trust (REIT) by DLF Assets would be the second such offering on the Singapore stock market from India’s booming property market, following the popular July IPO by Ascendas India Trust.

A top DLF official, who asked not to be identified, said Goldman Sachs and Lehman Brothers were advising the company on the deal but declined to give further details. The IPO would raise about $2 billion, India’s Business Standard newspaper reported on 19 September.

A banking source told Reuters “a lot of work" was being done on preparing the IPO, but it was too early to put a figure on the deal, which is unlikely to be launched until next year.

India’s property market has thrived since the country eased rules on inward investment in the construction industry in early 2005, opening the doors to funds run by the likes of Morgan Stanley, Citigroup and Merrill Lynch.

But after a doubling in prices in major cities over the last two years, prices have dipped recently in New Delhi and paused in Mumbai because new homes were getting too expensive even for an upwardly mobile middle class.

India has yet to pass legislation to allow real estate investment trusts, so Singapore is emerging as a preferred market for listings. The Ascendas India Trust, a business trust with similar characteristics to a REIT, jumped 18% on its 1 August debut after raising $330 million in its IPO.

REITs, which pay most of their rents as dividends, have caught on across Asia in the last five years because they give higher yields than bonds and offer capital growth if property markets rise, but without the volatility of stocks.

DLF Assets, founded by DLF Ltd Chairman K.P. Singh, owns property in special economic zones and IT parks. DLF Ltd sold some of its leased commercial buildings to DLF Asset for Rs24 billion, against a total consideration of Rs40 billion to separate its investment property from its development business, a leading newspaper reported.

DLF Ltd raised Rs91.88 billion in India’s biggest-ever IPO in June. Earlier this year, media reports said that U.S.-based hedge fund D.E. Shaw had invested $400 million in DLF Assets, while a fund sponsored by Lehman Brothers had invested $200 million in the company.