August awash as listed real estate sector gets floating feeling

DataRoom

The listed real estate sector is likely to be awash with more floats in the coming months, with Charter Hall working towards a September listing for its $1.5 billion initial public offering candidate and Propertylink remaining on track for its public debut with a value likely to top $568m.

It comes as the Viva Energy REIT exceeded all expectations this week by pricing at $2.20 a share, as first reported by The Australian, and Propertylink yesterday launched its marketing roadshow for analysts.

Both Viva and Propertylink are heading for August listings, with the $1.5bn Viva to lodge its prospectus next week after raising $911m, almost 70 per cent of which came from cornerstone investors. It is understood that the Viva float, executed by Bank of America Merrill Lynch and Deutsche, was largely oversubscribed, with Viva on track to retain 40 per cent interest of the Coles service station landlord, as widely expected.

The yield for Viva during the 2017 calendar year is 5.94 per cent, with the listing at a 10 per cent premium to net tangible assets, at 1.1 times, in a deal that has proved highly lucrative for its parent, global energy giant Vitol.

It emerged last month that Charter Hall Group was planning to float its Charter Hall Long WALE REIT through UBS and JPMorgan.

The fund includes various industrial and hospitality assets, which have a weighted average lease expiry of more than 12 years and the IPO will likely involve a raise of at least $600m.

It will be interesting to see if Charter Hall cuts a deal to buy more of the pub landlords that could be up for sale, such as Redcape, as some have predicted for the entity.

The latest rush towards the property sector comes on the back of low interest rates, with investors now searching for high-yielding assets.

Propertylink will list on August 5 on a deferred settlement basis.

Research released yesterday from Goldman Sachs indicated that Propertylink’s value was estimated to be between $568m to $690m.

The equity valuation range equates to a 26 per cent premium to net tangible assets at the low end and 53 per cent at the top end.

It also represents a 7.3 per cent dividend yield at the top end and 6 per cent at the bottom.

One of challenges for those working on the IPO will be convincing investors that the business would not head down the same road as Valad Property Group, which faced near collapse during the global financial crisis.

Both Propertylink and Valad are co-founded by Stephen Day.

Credit Suisse and JPMorgan are also joint lead managers on the float.

The next potential deal could involve a major corporate divesting its real estate assets.

Candidates could include Woolworths, with a spin off of its petrol stations, and Healthscope, which may opt to sell its hospital property portfolio as previously considered in the past.