Far East Hospitality is set to raise USD$575 million in an initial public offering after pricing it at the top end of an indicative range, sources said, making it Singapore's second-largest offering this year.
Far East, which owns hotels and serviced residences, drew strong demand from institutional investors attracted by its yield and exposure to Singapore's buoyant tourism sector.
"It's still a yield play in the market now. People are looking for something stable and anything beyond 5 percent looks attractive," said Ong Kian Lin, an analyst at Maybank Kim Eng Securities.
The trust plans to sell stapled securities at SGD$0.93 each, representing the top of an indicated SGD$0.86 - SGD$0.93 range, two sources with direct knowledge of the matter said.
Far East Hospitality, which is backed by Singapore property developer Far East Organisation, has seven hotels including Orchard Parade in its portfolio and is expected to benefit from the city-state's buoyant tourism sector.
"Tourism in Singapore, although it is slowing down, is still expected to be stable," Ong said, adding he expects hotel occupancy to rise to 90 percent towards the end of the year, boosted by the Formula One Grand Prix in September and year-end holidays.
Hotel occupancy rates in Singapore averaged 86 percent in May and visitor arrivals in January-May were up 12 percent from a year earlier, according to the Singapore Tourism Board.
Some of Far East's assets, such as Orchard Parade, have room for upgrading works, which will improve the trust's overall distribution per unit in future, Ong said.