Singapore’s OUE in Talks With Banks to Set Up Real Estate Trust

Overseas Union Enterprise Ltd. (OUE), which is buying California’s tallest building, said it’s in talks with banks to set up a real estate investment trust in the city-state.

The Singapore real estate company “is always examining opportunities to improve shareholder value,” OUE said in a statement to the city’s stock exchange. The properties for the REIT, the size, timing and terms of the share sale are under review, the company said.

The shares, which were halted for trading pending this announcement, resumed trading at 1 p.m. in Singapore. The stock climbed 2 percent to S$3.06 as of 1:12 p.m., the highest since June 2011.

Singapore’s property trusts, were the best performers in Asia in the past year after Japan. Singapore REITs were the biggest fundraisers in the city’s initial public offering market in the past year, raising S$3.4 billion ($2.7 billion), or 68 percent, of the S$5 billion of stock sold in Singapore IPOs in the past 12 months, according to data compiled by Bloomberg.

The biggest share sale was the S$1.6 billion raised by Mapletree (MAGIC) Greater China Commercial Trust, a REIT that owns assets including the Festival Walk shopping mall in Hong Kong and an office complex in Beijing. The trust, which was also Asia’s biggest share sale this year, surged 12 percent from its IPO price.

REIT Returns

Singapore REITs posted a one-year total return of 45 percent, trailing Japan’s 66 percent, according to data compiled by Bloomberg. The measure tracking REITs in Singapore climbed 29 percent in the past year, compared with the 8.8 percent increase in the Singapore benchmark Straits Times Index.

OUE intends to turn its hospitality assets into a REIT and estimated S$1 billion valuation surplus in hotel assets, Maybank Kim Eng analyst Ong Kian Lin said in a client note dated March 5, citing the company.

The Business Times reported earlier today that OUE chose Credit Suisse Group AG, Goldman Sachs Group Inc. and Standard Chartered Plc to advise on the $800 million hospitality REIT listing, citing a Reuters report that didn’t identify its sources.

OUE said earlier this month it’s buying the U.S. Bank Tower in Los Angeles, the tallest in the West Coast state, for $367.5 million as it expands beyond its base in Singapore.

OUE is controlled by Executive Chairman Stephen Riady, a son of Mochtar Riady, who controls Indonesia’s Lippo Group, with businesses ranging from real estate and financial services to food across Asia.

To contact the reporter on this story: Pooja Thakur in Singapore at pthakur@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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