Champion Reit share sale attracts lukewarm response

Tepid margin financing may indicate retail interest in reits cooling, say brokers

Champion Real Estate Investment Trust saw only lukewarm margin financing on the first day of its public offering in a sign that retail investor interest in reits may be starting to cool, brokers said.

They said while Champion Reit's unattractive yield had discouraged retail investors, overall interest towards reits was beginning to wane.

Sun Hung Kai Securities, a major initial public offering margin lender, said it had lent only $100 million for Champion Reit, while Phillip Securities reported about $14 million worth of orders.

Celestial Asia Securities and KGI both said the demand had been too small to be noted while Prudential Brokerage said they had received no orders on the first day.

'Although a tepid response is normal for most public offers, I believe that Tianjin Port [Development Holdings] has stolen the limelight,' one trader said, referring to the ports giant which plans to list on May 24.


'The odds for investing in Champion Reit are lower compared with Tianjin Port, making investors reserve their money for the latter,' said Ben Kwong, a director at KGI Asia.

The overall sentiment towards reits has changed significantly from six months ago, when the products were among the hottest on the market,' said Prudential Brokerage associate director Kingston Lin. 'Reit share prices have declined with some even dropping below the offer price. This deters some investors from subscribing.'

Prosperity Reit which touched $2.90 at its debut on December 16 has already dipped below its offer price of $2.16. The counter dipped to its lowest at $2.125 on April 25 and closed yesterday at $2.15 - 10 cents below its offer price.

GZI Reit, meanwhile, which has fallen as low as $2.975 compared with its offer price of $3.075, finished yesterday at $3.125.


The Link Reit, however, still continues to perform strongly. It soared 60.19 per cent from its offer price of $10.30 and on March 17 the reit marked fresh highs of $18.05.

'Investors should be careful in reading the yield of Champion Reit. The yield of 4.84 per cent to 5.57 per cent offered is an annualised figure, meaning the actual dividend yield is lower,' said Stephen Tse, a research analyst at Phillip Securities.


He believed this was one reason that margin financing demand had been weak on its first day.

Champion is the only single-asset reit in Asia. The trust aims to raise $7.1 billion at a unit price of $5 to $5.75 each. The offer closes on Tuesday and trading starts May 24.

Merrill Lynch, Citigroup and JPMorgan are joint bookrunners.