Lippo Chief Riady Plans $5 Billion of Singapore REITs (Update1)

Lippo Chief Riady Plans $5 Billion of Singapore REITs (Update1)

By Chen Shiyin and Leslie Tan

June 25 (Bloomberg) -- Lippo Group plans to sell shares in real estate investment trusts that will buy as much as $5 billion of its Asian assets, freeing up capital to invest in higher- yielding projects including Singapore residential developments.

The Jakarta-based company, which set up its first property fund in Singapore last year, plans to sell shares of trusts backed by shopping malls and office buildings, Chief Executive Officer James Riady said in an interview yesterday.

``We like the concept of a REIT,'' Riady said at the World Economic Forum conference in Singapore. A trust ``allows developers to tap into the REIT and enable them to do much more things than they would otherwise be able to do.''

The property trusts will help Lippo tap funds from Singapore's five-year-old REIT market, where developers have sold shares in 16 trusts with a combined market value of $19.2 billion. The group sold shares in its first REIT in Singapore last year and the stock has lagged behind its rivals.

Residential developments offer higher returns than office and retail properties because homes are usually sold within two to three years.

``The Singapore property market is still fairly hot,'' said Jay Moghe, who oversees $150 million at Opes Prime Asset Management Pte in Singapore. ``Within the Asian REIT story, Singapore has played an important part. These trusts offer relatively good yields and as that market develops, we'll see more players wanting to set up REITs.''

More Singapore Apartments

Lippo's shopping mall REIT will sell shares within the next 18 months, while its commercial trust will be created within two years, Riady said.

The developer, which has sold at least two apartment projects in Singapore's downtown in the past year, is planning to start selling homes at a residential development on the city's resort island of Sentosa, he said.

``The potential return for residential developments is very high because the return on equity is very high,'' said Winston Liew, an analyst at OCBC Investment Research in Singapore. ``But the risks are also very high.''

Shares of First REIT, which owns seven health-care properties in the region, have gained 13 percent in the past six months. Other REITs traded in Singapore have risen by an average of 29 percent, according to data compiled by Bloomberg.

Going Shopping

Lippo, which owns Indonesia's biggest publicly traded developer, controls as many as 40 malls through its units, Riady said. The group also owns stakes in publicly traded companies including PT Matahari Putra Prima, Indonesia's largest department-store operator, and Robinson & Co., Singapore's oldest retailer.

``We would like to see a mall REIT because at the end of the day, the middle-class and the affluent like to go to the malls,'' he said ``They like to go shopping, encouraging bigger and better-quality malls.''

The company intends to sell shares of its property trusts in Singapore because of government efforts to encourage investment and its low tax-rate for REITS, Riady said. Local corporate investors pay a 20 percent tax on dividends paid by trusts, while individual investors don't pay any taxes.