M&L mulls Sydney listing after scrapping 2012 Singapore IPO

M&L Hospitality Trusts, the owner of Australia’s biggest hotel, may seek a listing in the country after abandoning its initial stock sale in Singapore last year.

The trust, with $1 billion of hotels in five nations, may add more properties before its next listing attempt, said Michael Kum, the chairman of the Singapore-based M&L. The owner of the Four Points by Sheraton overlooking Sydney’s Darling Harbour dropped plans to raise as much as S$463 million ($373 million) in April 2012 because demand was weaker than targeted, two people with knowledge of the matter said at the time.

“Whenever the market recovers, we’ll look at a listing seriously, whether it’s Australia or Singapore,” Kum said in an interview in Singapore yesterday. “We’ll continue to look at Australia, at Brisbane, Perth” for acquisitions, he said of the state capitals of Queensland and Western Australia.

Capital values of hotels in Australian city centers are expected to rise 2.7 percent over the next two years, the strongest growth of any commercial property asset class, according to a second-quarter survey of real estate professionals by National Australia Bank Ltd.

Companies have raised $4.8 billion through initial public offerings in Singapore in the past year, with REITs and business trusts accounting for the majority of fundraising, according to data compiled by Bloomberg. In Australia, they raised $2 billion, the data show.

Most Rooms

Kum declined to give more details on the next listing attempt. M&L owns two hotels each in Melbourne and Sydney, where its 683-room Four Points was cited by the New South Wales state government as the biggest in the country. The property, along with assets including Japan’s Hilton Nagoya, the Swissotel in Sydney and the Ibis in Singapore, were among the hotels in the earlier share sale in the city-state.

M&L last week said it had received government approval to expand its Sydney Four Points by adding a third tower and 230 rooms. The company is also spending about A$6 million ($5.8 million) to upgrade its Citigate Hotel in Melbourne from an “economy” to a “mid-scale” property, Kum said.

In addition to Australia, M&L owns four hotels in Japan, one in Singapore, one in New Zealand and two in London.

The decision to consider the Australian stock market also came after the Singapore benchmark Straits Times Index (FSSTI) posted the smallest gain among the world’s developed markets. The Australian benchmark stock gauge has climbed 15 percent this year, compared with the Straits Times Index’s 1.2 percent advance, according to data compiled by Bloomberg.

Good Time

The Singapore dollar has increased 1.5 percent this year against the U.S. currency, while the Australian dollar fell 7.4 percent, the most among developed markets.

“In the case of Singapore and Australia, both are quite developed markets, so the risk capital is not going to diverge that much,” said Alan Richardson, a Hong Kong-based money manager at Samsung Asset Management Ltd. “This is a good time for opportunistically listing REITs right now because the risk-free rates have peaked over the next three to six months, so there is this window of opportunity.”

M&L is also considering the stock offering as hotel-property sales increased. Asia-Pacific hotel sales more than doubled to $2.8 billion in the third quarter, with Australia, Singapore and Japan accounting for 83 percent of the investments, property broker Savills Plc said in a report on Oct. 7. Hotel sales will rise about 30 percent in the fourth quarter, it added.

The S&P/ASX 200 A-REIT Index that tracks property trusts in Australia trades at a 5.4 percent yield, while a similar gauge of REITs in Singapore offers 4.8 percent. Still, the valuations are higher in Australia, where the REIT index trades at 18 times earnings, or twice the multiple for Singapore.

“Wherever there’s good opportunity, that’s where we go,” Kum said.

Source: Bloomberg Businessweek, 23 October 2013