Sunway REIT: Southeast Asia's biggest IPO

SUNWAY Real Estate Investment Trust, controlled by Malaysian property tycoon Jeffrey Cheah, is raising about RM1.5 billion in Southeast Asia’s biggest initial public offering this year, according to two people with knowledge of the matter.

Malaysia’s largest REIT and part of property and hotel group Sunway City Bhd priced shares on offer to institutions at 90 sen each, the low end of the 90 sen to 98 sen range marketed to investors, said four people who declined to be identified before an official announcement. The sale is being managed by a group of banks led by Credit Suisse Group AG and RHB Capital Bhd.

The IPO tops Masterskill Education Group Bhd’s RM771.4 million sale in May and underscores rising investor appetite for stocks in the Southeast Asian nation amid an economic rebound from last year’s recession. Sunway REIT will begin trading next month and join 12 other REITs listed on the Kuala Lumpur stock exchange.

“Sunway REIT is a defensive REIT that will offer unit-holders a longer-term growth catalyst,” Mervin Chow Yan Hoong, an analyst at OSK Research Sdn Bhd, said in a report June 22. “Malaysians are great shoppers and the recent global recession may have only slightly curbed this tendency.”



Malls, Hotels

Cheah is founder and chairman of the Sunway group and was ranked 18 in Forbes Asia’s list of the 40 richest Malaysians this year with a net worth of $350 million. The property trust includes shopping malls and hotels valued at RM3.7 billion, making it the biggest REIT in the country by asset value.

Its Sunway Pyramid Shopping Mall is the largest in Malaysia by net lettable area, according to OSK. More than 70 per cent of Sunway REIT’s income is derived from its retail properties.

The REIT also owns the Sunway Resort Hotel & Spa and the Pyramid Tower Hotel in Petaling Jaya, outside Kuala Lumpur.

Tourist arrivals in Malaysia reached a record 23.6 million in 2009, from 22 million a year earlier, according to data from the Malaysia Tourism Promotion Board.

Southeast Asia’s third-largest economy emerged from its first recession in a decade in the last quarter. The country may expand by between 4.5 per cent and 5.5 per cent this year after shrinking 1.7 per cent in 2009, Bank Negara Malaysia said in its annual report on March 24.

Four so-called cornerstone investors agreed to buy a 14 per cent stake in Sunway REIT, according to the sale document. They are the Employees Provident Fund, Permodalan Nasional Bhd, Government of Singapore Investment Corp and Great Eastern Life Assurance (Malaysia) Bhd.

As part of the REIT listing, Sunway City last month agreed to sell two shopping malls, a hypermarket, three hotels and two office towers to the property trust for RM3.7 billion. - Bloomberg