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Malaysia’s Pavilion REIT Said to Raise $223 Million in IPO

Pavilion Real Estate Investment Trust, a Malaysian shopping mall trust part-owned by Qatar Investment Authority, is raising 710 million ringgit ($223 million) in an initial public offering, two people with knowledge of the matter said.

The company plans to sell units at 90 sen apiece to institutions and at 88 sen to retail investors, said the people, who asked not to be identified as pricing details are private. Pavilion REIT had marketed the units at 88 sen to 90 sen. Demand exceeded supply by more than 26 times, one of the people said.

The IPO will be the Southeast Asian nation’s fourth biggest this year, after share sales by Bumi Armada Bhd., UOA Development Bhd. and MSM Malaysia Bhd. Investor demand for shares exceeded supply by more than 40 times for Bumi Armada and MSM’s offerings.

“It’s probably due to the scarcity factor for big, good quality IPOs and an appetite for new stock in Malaysia, which seems to be a defensive market,” said Christopher Wong, a Singapore-based senior investment manager at Aberdeen Asset Management Asia Ltd., which oversees more than $90 billion of regional equities. “In volatile periods, investors will be even more discerning.”

Pavilion REIT’s offering comes as PCCW Ltd., Hong Kong’s biggest phone carrier, sold units at the bottom end of a marketed range, raising HK$9.3 billion ($1.2 billion) in an IPO of its telecommunication business trust. Billionaire Chairman Richard Li struggled to draw investors for the Chinese territory’s first business trust even after offering a yield of about 9 percent, that beats most real-estate trusts in the city.

Distribution Yield

Kuala Lumpur-based Pavilion REIT, which is expected to list next month, has a distribution yield forecast of as much as 6.73 percent based on the fiscal 2012 earnings estimate, according to a note to investors.

The company owns the Pavilion mall and an adjacent office tower in the capital’s Bukit Bintang area, which Malaysia is developing to rival Singapore’s Orchard Road.

The mall, with a gross floor area of 2.2 million square feet, has an appraised value of 3.4 billion ringgit as of June 1, according to its prospectus, and houses luxury retailers including Bulgari SpA and Prada SpA.

Pavilion REIT said earlier this month it’s seeking acquisitions within the country and throughout Asia.

Qatar Investment Authority will be the trust’s single largest owner with a 36 percent stake, according to its prospectus. The trust aims to start trading in Kuala Lumpur on Dec. 7. Pavilion REIT plans to pay out at least 90 percent of its distributable income on a half-yearly basis from 2012, it said. From the listing date to Dec. 31, 2012, it will distribute 100 percent of its income.

CIMB Group Holdings Bhd., Malayan Banking Bhd., Credit Suisse Group AG and QNB Capital are among managers of the sale.

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