Return of the Reits? Singapore’s IPO scene set to come alive after subdued year

SINGAPORE’S status as a real estate investment trust (Reit) stronghold is likely to result in higher initial public offering (IPO) activity next year, as possible rate cuts will encourage new Reit listings on the Singapore Exchange (SGX).

To be sure, industry watchers remain cautious amid the return of Donald Trump as president of the United States, which may result in the US Federal Reserve cutting rates at a slower pace.

For the year to Dec 17, Singapore welcomed four new listings on the Catalist board. There were no mainboard listings. The companies raised a total of S$45.9 million, according to bourse data.

This is below than the S$46.9 million raised by six Catalist IPOs in 2023, and sharply lower than the S$580.3 million raised by 11 IPOs in 2022. It is also far behind the S$1.7 billion and S$1.4 billion raised in 2021 and 2020, respectively.

Reit IPO buzz

However, as general market sentiments improve, SGX is poised for heightened IPO activities next year, said observers.

Martin Siah, Singapore country executive and head of global corporate and investment banking for South-east Asia at Bank of America (BOA), noted that the SGX has been “one of the best performing equities markets” in Asia-Pacific year-to-date, “auguring well for potential significant uptick in IPO and equity capital markets activities heading into 2025”.

In particular, the arrival of new Reits could prove a significant lifeline for Singapore’s IPO hopes.

News of at least two potential Reit listings here have surfaced in recent months.

Japan’s Nippon Telegraph & Telephone Corp is said to be mulling the listing of a data centre Reit in an IPO that could raise as much as US$1 billion.

Meanwhile, French property asset manager Praemia REIM is considering a potential listing of a healthcare Reit, which could raise “several hundred million US dollars”, according to sources cited in media reports.

This renewed interest in business trusts comes after the US Fed in September delivered its first rate-cut in four years, with a second in November.

Lower interest rates will lower the borrowing costs for Reits, while making dividend payouts more attractive to investors, noted Robson Lee, partner at Kennedys Legal Solutions.

Darren Ng, transactions accounting support partner at Deloitte Singapore, said: “As global interest rates stabilise, investor appetite for income-generating assets like Reits is expected to strengthen.

“With its established Reit framework, Singapore remains a preferred listing destination for Reits in Asia, attracting both local and international issuers looking to tap into a well-regulated market with high liquidity.”

EY IPO leader Chan Yew Kiang expects Reit and business trust IPO-aspirants to be from the data centres and infrastructure projects space.

BOA’s Siah noted: “Strong sponsors with high quality assets, for example, in the digital infrastructure and healthcare-related sectors, could explore Reit IPOs in Singapore as comparable listed peers are trading favourably, at or above their net asset value.”

That said, he warned that markets are “generally expecting a more gradual rate-cut environment” under a Trump-led US administration.

This is as the US president-elect’s planned policies could keep inflation up, which may in turn result in the Fed maintaining higher-for-longer interest rates.

TSMP Law Corporation partner Leon Lim added: “Interest rates are not expected to come down as much under a Trump presidency, and with the US dollar strengthening in the short term, cash may flow to the US in the near term.”

Stable global hub

Reits aside, companies with Asean operations could also be key targets of listing in Singapore, as the country has a highly developed capital markets and follow-on capital raising framework, said BOA’s Siah.

Felicity Chan, Jefferies’ South-east Asia equity capital markets (ECM) origination and Asia ECM syndicate, said: “We believe that Singapore offers a unique perspective as a politically stable global hub for capital flows, which would make companies consider SGX as the ideal listing venue.

“We see the opportunity for both global and regional Asian companies with a large and fast-growing presence in Asia as appropriate candidates to seek an SGX listing.”