Viva Industrial Falls in IPO on Rate Concerns: Singapore Mover

Viva Industrial Trust, a Singapore business and real estate trust, opened lower on its first day of trading in the island-state, amid concerns interest rates will rise and make it difficult for REITs to raise funds.

The shares opened at 76.5 Singapore cents at 2 p.m. local time, 1.9 percent lower than the initial stock offering price of 78 Singapore cents apiece. They closed unchanged after swinging between gains and losses. Viva Industrial raised S$365 million ($294 million) through a share sale to Chinese property tycoon Tong Jinquan and the public.

The U.S. housing market is robust and policy makers should resume normal policy as soon as possible, Federal Reserve Bank of Dallas President Richard Fisher said in an answer to a question after a speech in Sydney today. Singapore property trusts face refinancing risks when borrowing costs rise, which may force them to sell assets or shares to boost funding, Fitch Ratings has said.

“REITs are not in favor now,” said Vikrant Pandey, an analyst at UOB Kay Hian Pte in Singapore. “There was the U.S. news that the Fed tapering is not off the cards yet so in such an environment where interest rates are expected to rise, REITs will be out of favor.”

REITs and business trusts were the biggest fundraisers in Singapore’s IPO market in the past year, according to data compiled by Bloomberg. The FTSE Strait Times Real Estate Investment Trust Index, comprising 32 trusts, has declined 5 percent this year after gaining 37 percent in 2012.

Dividend Yield

Viva Industrial forecast a dividend yield of 8.8 percent for 2014, according to an October filing.

In July, Viva bought a mixed-used development, UE BizHub East, in Changi Business Park from United Engineers Ltd. for S$518 million. This property in eastern Singapore, together with two other developments in the Tuas and Chai Chee areas in the city-state, are the assets backing the trust.

Standard & Poor’s Ratings Services today assigned its BB+ rating to Viva, with a stable outlook, citing the quality and attractive prospects for the REIT’s key asset, the UE Bizhub EAST business park. S&P said the property should help offset lower occupancy rates and a lack of a diverse portfolio.

Singapore’s industrial property values rose to a record in the third quarter, climbing 2.8 percent in the three months ended September, according to government data going back to 1993. Rents for the buildings rose 4.4 percent in the third quarter, according to the data.

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