Elite Commercial REIT Singapore IPO- Did It Suay Suay Choose A Wrong Time? Or Is Elite Commercial REIT Immune To The Wuhan Pneumonia?

Elite Commercial Trust seems to have filed for IPO during a time of poor market sentiment over the increasing number of Wuhan pneumonia cases that seems to be spreading across China as well as other Asian countries. But I think it will perform well for the IPO as the public offer tranche is only a mere £3.3 Million or 3% of the total IPO offering as reported by the The Business Times. The bulk of the offering will go on to international investor outside the US of £63.2 Million to £74.3 Million. A third tranche of £52.9Mil (44.3%) of the offering is already committed to cornerstone investors- Bank of Singapore, CIMB Bank Berhad Singapore Branch and UBS AG Singapore Branch on behalf of their private banking clients.

The sponsors are Elite Partners Holdings Pte Ltd (Fund Management Group), Ho Lee Group Pte Ltd  (Developer of industrial and residential properties and one of major sponsors of Viva Industrial Trust during its IPO) and Sunway RE Capital Pte Ltd (a subsidiary of Malaysia's largest conglomerates Sunway Berhad).

The concentration of major tenant in a government agency is actually quite interesting. I think that it actually reduces the rental default risk despite going against the traditional convention of wide spread diversification. It is backed by the British government which can raise funds easily to meet its obligations. On non-renewal risk upon expiry by the government, I believe that other tenants can be found easily as most of the properties are close to public amenities and public transportation. Elite management team will need to work hard before expiry of leases to market and secure new tenants in the worst case scenario.  

Overall, I thought it is weird that Elite Commercial REIT has no confidence at all by allocating only £3.3 Million to Singapore investors as the public offer tranche. I will probably give this IPO a miss in view of conserving my cash on hand during this period of economic uncertainty as well as having some reservations over the strange mixture of sponsors.