Tesco Lotus has today announced plans to launch an initial public offering (IPO) of a Thai property fund which will provide investors with the chance to share in its success in Thailand.
With an appraised value of more than 14 billion Baht (equivalent to more than £300m) the Tesco Lotus Property Fund will initially comprise 15 existing high quality shopping malls, each anchored by a Tesco Lotus hypermarket, in prime locations across Thailand, as well as freehold land and ground leases. Tesco Lotus will continue to lease all 15 hypermarkets from the Fund.
Laurie McIlwee, Tesco’s Chief Financial Officer, said:
“Today’s announcement of the Property Fund is in line with the property strategy we unveiled earlier this year and will be a great example of the value we create through our property.
“By releasing value from our Thai property we will be able to invest in further innovation and growth for our customers and shareholders. Thai customers, staff and investors will also be able to share in Tesco Lotus’ success in Thailand”.
The application to establish the Tesco Lotus Property Fund IPO was filed today with the Securities and Exchange Commission (SEC) of Thailand. The initial public offering will be the largest retail property fund in Thailand and the most geographically diverse, with a strong portfolio of properties in Bangkok, provincial capitals and popular tourist areas. The final structure of the Fund is subject to market conditions and approval by the SEC.
Tesco Lotus is the leading retailer in Thailand, with over 800 stores across five formats (Plus mall, Extra, Hypermarket, Talad and Express). Tesco Lotus employs over 38,000 people and serves 35 million customers every month.
Our property strategy ensures that Tesco retails from the best located and designed properties, wherever it operates. As a result, we also create long-term shareholder value from property development. We invest substantially more in new stores and land than we divest each year, and when we do divest, the profits we release reflect the value we create as a developer. During our full-year results in April, we announced that a proportion of future property profits would come from our international countries.
A property fund listed on the Thai Stock Exchange is similar to a Real Estate Investment Trust (REIT) in other markets. On approval units in the property fund will be made available to both individual and institutional investors through a public offering
This quarter, there were no significant changes to yields for property investments despite the increase in interest rates, however yields for 1-yr government bonds and 12-months fixed deposit rates increased strongly during this quarter and if this pattern continues property investments may be less appealing to investors in the future.
notes CBRE Thailand in its latest Thailand Investment quarterly review