Frasers Hospitality Trust IPO set to rake in $365m

FRASERS Hospitality Trust (FHT) is slated to raise $365.2 million from its initial public offering (IPO) and from cornerstone investors.

Its offer price of 88 cents translates into a yield of 7 per cent for the projection year from October 2014, said its prospectus lodged yesterday.

FHT is selling 182 million stapled securities in its IPO at 88 cents apiece. This will consist of a placement tranche of 136.6 million stapled securities and a public tranche of 45.5 million stapled securities.

Its sponsor Frasers Centrepoint Limited (FCL) is injecting six serviced residences into FHT; FCL's major shareholder TCC Group is injecting the other six hotels that include InterContinental Singapore and The Westin Kuala Lumpur.

With an initial $1.66 billion portfolio of 1,928 hotel rooms and 842 serviced residence units, FHT will be the largest global hospitality portfolio listed here in terms of the number of rooms, the company said.

Another 232.9 million stapled securities will be issued to cornerstone investors, including DBS, Malaysia's Fortress Capital Asset Management, Metro Holdings and Gordon Tang, the non-executive director of SingHaiyi Group.

Tong Jinquan, the founder of Shanghai-based developer Summit Group and China's 35th richest man on the Forbes list, will take a 4.8 per cent stake, making him the largest cornerstone investor in FHT.

His other holdings in Singapore Reits, also held through an investment holding company, include Suntec Reit, Cambridge Industrial Trust, Lippo Malls Indonesia Retail Trust and OUE Commercial Reit.

Post-listing, FCL and the TCC Group will hold respective 22 per cent and 43 per cent stakes in FHT before the over-allotment option is exercised. FHT is expected to have a market value of $1.77 billion, based on its offer price.

Its listing is said to mark the first step in merging the property assets of Thai tycoon Charoen Sirivadhanabhakdi's business empire comprising FCL and the TCC Group, after winning control of beverage and property conglomerate Fraser and Neave in a $13.8 billion takeover last year. F&N spun off property arm FCL in a listing in January.

The prospectus says: "FHT is able to leverage and benefit from the Sponsor's and Strategic Partner's networks for a future pipeline of assets that FHT could potentially acquire, where these assets meet FHT's investment criteria."

But FHT has "full flexibility in acquiring suitable assets regardless of hotel operator", though it has right of first refusal (ROFR) for income-producing assets from FCL and TCC Group.

Based on unaudited proforma performance, FHT's net property income from its initial portfolio was $80.3 million in fiscal 2013, up from $76.9 million in 2012; distribution income was $66.4 million in FY2013, up from $62.3 million from FY2012.

FHT has a policy to distribute 100 per cent of its distributable income in the forecast period of 2014 and 2015 and at least 90 per cent of its distributable income thereafter.

DBS is the issue manager for this IPO and is underwriting the IPO with Morgan Stanley, Standard Chartered and UOB.

The offer will open on July 1 and close on July 10. Trading of FHT securities will begin on July 14.