DBS Bank is looking to launch a $2 billion real estate investment trust (reit) in Singapore which will bundle four to six shopping centres in southern China for a Hong Kong-based property developer.
'We are working on a number of reit issues for a couple of developers but the China Reit is likely to come out first,' said Walter Cheung, the global head of debt capital markets at DBS.
Mr Cheung said the issue size of the China Reit would be more than $2 billion and the annual yield probably would exceed 6 per cent after accounting for an appropriate level of risk premium for mainland properties.
Tenancy terms of the retailers in the shopping centres ranged from two to 10 years, and while a longer tenancy term would mean less room for upside, it was still preferred due to higher rental certainty, he said. Less than half the tenants dealt in international brands, but some of the local brands, were quite strong.
But investors will be exposed to potential foreign-exchange risk, as rental income will be in yuan, while the dividend will be in US dollars.
Besides shopping centres, DBS is also studying the feasibility of a reit of industrial land in the mainland.