Didn’t notice but apparently OUE is spinning off their 2 Orchard Hotel as a REIT.
You can read the prospectus here.
Like most hospitality REIT, it ends up as a stapled security. But you will notice the attractiveness.
- Its got 2 Mandarin Hotel which are reasonably well branded hotels
- Its got a greater than 7% dividend yield
Hospitality REITs work a bit differently from most REITs in that a sizable part of their income depends on revenue earned from the business and as such they are a proxy to the domestic tourism economy.
Even then, they look attractive versus Far East and CDL Hospitality REIT, 2 Hotel REITs listed in Singapore. Those 2 REIT will likely offer only 6% yield at current market price.
It is strange how come SPH, Mapletree this year decide to list this properties as a REIT with so little assets. All three will list with only 2 assets.
I did not managed to look past all but there could be an explanation for the higher yield.
Both Mandarin hotels are leasehold and they run till 2057.
That is 44 years of land lease only.
Its basically like an industrial REIT with a fluctuating income and at a lower yield.
Whether to go for this IPO or not depends on the receptiveness of the investment public to this kind of segment. It used to be very popular but given the recent drawdown its hard to say.
Long Term wise This doesn’t appeal as a long term hold. Would rather go for Aims Amp here!
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