“We felt we needed to do this for Singapore”

1 August 2018

Photo: Ronnie Chua/Shutterstock.com

In 2001, the attempt to list Singapore’s first real estate investment trust (REIT) failed. A foreign bank was lead manager while DBS was the local coordinator for the retail tranche.

That first attempt failed because of insufficient investor demand. A year later, DBS successfully took the REIT – renamed CapitaMall Trust – to market.

This SGD 200 million IPO opened up a new asset class for Singapore investors, and today, Singapore’s REIT market is the largest in Asia (ex-Japan) with a market capitalisation of about SGD 100 billion (as of August 2019).

DBS Group Head of Capital Markets Eng-Kwok Seat Moey shares her memories.

Putting Singapore on the map

I still remember the Monday the unwanted news came – that our first attempt to bring a new asset class to the Singapore market failed.

That fateful day, Eric Ang, who was then-Group Head of Capital Markets, personally broke the news to me. “Don’t be disappointed, don’t be sad,” he said.

But it was a blow to us even though we were only the local coordinator for the retail tranche. Only the weekend before, a colleague and I had gone to Tampines Mall, one of the IPO properties, to help distribute prospectuses for Singapore’s inaugural REIT – SingMall Property Trust by CapitaLand.

A successful listing would have been a watershed for Singapore’s capital market. Until then, Australia and Japan, as well as the US and Europe, already had established REIT markets. But in Singapore, this was new territory for us.

Regulations for REITs had been launched in 1999, and now – some two years later – here we were, being part of the pioneering team to bring this asset class to life. The DBS team had to innovate and adapt processes from other jurisdictions to the local context.

The SingMall Property Trust held a portfolio of three Singapore retail malls: Funan the IT Mall, Junction 8 and Tampines Mall. Being groundbreaking for the industry, the market participants took a risk in being involved. From valuers to accountants to regulators, all of us had to go through a learning process. It required a lot of determination, commitment and grit to launch this first REIT for Singapore.

Following this first attempt, we knew CapitaLand was still very determined to get the deal done. So while it was daunting to try again, we were fully committed to bringing the transaction to market. Ultimately, we felt we needed to do this for Singapore. To be a leading financial centre, Singapore needed to be in this space.

The second time, DBS was in the driver’s seat as the sole lead manager, underwriter and bookrunner in structuring, managing and distributing the REIT, which was renamed CapitaMall Trust.

What did we do differently?

Our first attempt to list the REIT failed to take off because of insufficient understanding from investors, which resulted in a lack of investor demand. In particular, large institutional investors such as funds and insurers had been adamant that they did not have a mandate for REITs in their portfolios. Equity teams felt that REITs – which had bond-like features – did not fit their mandate. Bond teams felt the REITs – which had equity-like features – did not fit their mandate. So we were bounced around.

The second time around, we doubled up on investor education and reached out to less traditional equity investors. This involved an extensive roadshow with investors, both locally and globally, to convince them of the merits of the product, and when they understood that REITs provided the best of both worlds, these large institutional investors were happy to come on board.

We also ensured that we engaged the retail community through brokerage networks and retail investor associations to educate them on the product. In addition, we provided greater certainty of investor demand by securing cornerstone investors for 46% of the IPO. At the same time, we provided certainty of deal completion to CapitaLand by hard underwriting the IPO.

On 17 July 2002, CapitaMall Trust was over four times oversubscribed with SGD 1 billion worth of investment demand, and successfully listed. Singapore’s first REIT had made its debut.

After that, DBS helped to list other REITs in quick succession.

The Ascendas REIT, which contained a portfolio of science parks, made its market debut on the stock exchange the same year. The following year, we listed Singapore’s first cross-border REIT, Fortune REIT.

Today, Singapore’s REIT market has a total market capitalisation of about SGD 100 billion, and is not just the largest in Asia ex-Japan, but also the most international globally. It is also very dynamic in depth and breadth – with our REITs and business trusts holding a variety of property assets, from data centres to nursing homes.

DBS was instrumental in bringing the lion’s share of these trusts to market, and connecting many of these foreign assets with Asian investors.

Over the years, DBS has been relentlessly pioneering capital market innovations. We were the first in the world to allow investors to use ATMs to subscribe for shares as early as 1993 ahead of Singtel’s IPO. In April 2012, DBS again became the first, and today remains the only bank, to offer electronic securities application through mobile banking.

On REITs, we’ve come a long way since that pioneering attempt more than 15 years ago. Now when I go to the US, the large funds know us. They know Singapore has a very vibrant REIT market and DBS was instrumental to this. We put Singapore on the map.

Eng-Kwok Seat Moey joined DBS in 1998 when it acquired POSB, where she had been Vice President for asset management. She is currently Group Head of Capital Markets at DBS, where she oversees several teams on advisory and corporate finance, as well as structuring and execution of all equity transactions. Her experience also includes structuring and originating debt and equity-linked debt issues and structured finance.