Units of Singapore's latest real estate collective investment, OUE Commercial REIT (SGX:TS0U) failed to go above its IPO price of SGD0.80 on its first day of trading on the Singapore Exchange.
|OUE Commercial REIT's initial portfolio includes the OUE Bayfront in Singapore.
OUE Commercial REIT is the smallest of all four office REITs currently listed on the Singapore Exchange with an asset size of less than SGD700 million. The IPO raised SGD346 million (USD270 million) and promised a yield of 6.8 per cent to yield-hungry investors in a largely low-interest environment.
However unlike its REITs that have listed before 2013, OUE Commercial REIT has failed to see spectacular opening gains on its opening day. Analysts have cited its portfolio size as its main drawback. As a result, there was a notable lack of institutional investors in its IPO exercise. Most of the cornerstone investors are cash-rich individuals from China.
Although OUE Commercial REIT has a clear pipeline of three properties in which it can make acquisitions, the uncertainty surrounding interest rates may throw its growth plans into limbo - further reducing its appeal in the eyes of prospective investors.
Moving forward, unit prices for OUE Commercial REIT will likely rest on the management's ability to convince investors that it will be able to pursue a healthy growth strategy despite concerns over high interest rates. But judging from another commercial REIT IPO from a year ago - Mapletree Greater China Commercial Trust which has yet to announce plans for acquisition despite debuting with only two initial properties - it is unlikely to happen.