Singapore prizes NTT REIT listing in face of Hong Kong IPO blitz

SINGAPORE -- Singapore is hoping that its biggest initial public offering in years will stir investor interest for the city-state's market, which observers say has stalled in attracting notable listings while the Hong Kong bourse soars.

Some of these observers see the introduction of NTT DC REIT as a much-needed listing to raise the profile of the Singapore Exchange, which has not seen any IPOs cross the $100 million mark in years. This is despite the bourse's benchmark Straits Times Index cracking 4,000 points earlier this month to an all-time high and analysts praising the relative stability of Singaporean equities for investors amid U.S. President Donald Trump's constant tariff threats.

The SGX is welcoming on Monday afternoon the listing of a data center-focused real estate investment trust (REIT) backed by Singaporean sovereign wealth fund GIC and Japan's telecommunications giant NTT Group.

The IPO of NTT DC REIT is expected to raise $773 million and has been billed as the largest Singapore IPO of a property trust in more than a decade -- thanks in part to the global fervor over artificial intelligence and its need for data centers.

"The global data center market continues to grow strong and I think we're in still early innings, so there's a long runway for growth," Masayuki Ozaki, chief financial officer of NTT DC REIT Manager, told reporters last week in a briefing. "Over the next three years, the market is expected to grow 27.5% (compounded annual growth rate)."

The IPO was pegged at $1 per unit. Trading opened at $1.02 per unit, 2% above the offering price. The price rose as high as $1.03, before closing at the offering price.

Four data centers in the U.S., one in Austria and one in Singapore form the initial portfolio managed by the trust -- six assets valued at $1.57 billion.

GIC has a 9.8% stake in the entity -- the second-largest investor after sponsor NTT Limited, which will wind up with 25%, putting the REIT's worth at around $1 billion after accounting for public and institutional subscribers at the U.S. dollar price tag. Other backers include Pinpoint Asset Management, UBS Singapore and Viridian Asset Management.

"NTT DC REIT should be an asset recycling vehicle for NTT Group to which the proceeds could be reinvested into more development projects," Jayden Vantarakis, head of ASEAN equity research at Macquarie Capital, told Nikkei Asia.

The listing comes as NTT shifts its focus to data center expansion, positioning the infrastructure business as a key growth driver as its traditional telecom operations mature. It also marks the first data center-focused REIT launched by a Japanese company.

Data centers in the REIT serve customers from global technology companies to software players as well as a prominent American auto company, Arun George, an analyst at Global Equity Research, highlighted in a report this month. NTT has not disclosed the names of its clients.

While the facilities have "high occupancy" at 94.3% as of December, the report noted that a tenant at a California data center served a notice of termination in May, which brings the portfolio's occupancy rate down to 93.6%.

"Alternative tenants are currently being sought to fill up this capacity," George noted. "The forecasts assume a three-month vacancy period before a replacement tenant commences a new lease."

REITs count on reliable tenants or clients to offer investors a stable stream of dividend payouts as property managers collect dues -- highlighting the risks involved if payments are not received.

Keppel DC REIT for instance, another SGX-listed data center trust, had one tenant, Guangdong Bluesea Data Development, fall behind on rental payments in 2023, prompting the property manager to issue a demand for default on rent and coupon payments.

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Still, some investors favor expected income streams from payouts that REITs can offer despite the risks in real estate management. NTT REIT executives had considered other markets like the U.S. and Japan for its IPO, but chose Singapore for being "established" as a venue for listings of global assets.

"The Japanese market is not so friendly to global assets," Yutaka Torigoe, CEO of NTT DC REIT Manager, told reporters last week.

"The high-interest rate environment in the past few years has made the IPO market for REITs relatively quiet," Xavier Lee, equity analyst at Morningstar, told Nikkei. "For other real estate companies that are on the sidelines contemplating a REIT listing, a successful IPO for NTT DC REIT may give them the confidence to kick-start the process."

Singapore's IPO market in general has been largely subdued for the past few years, with the SGX's mainboard welcoming no IPOs from January to June, none in 2024 and just one in 2023. Singaporean software services company Info-Tech Systems' listing earlier this month was the first in a few years on the SGX mainboard. It raised $45.1 million, according to financial markets data provider LSEG.

This trend also holds true for Singapore-based companies. Out of the 16 Singaporean IPOs issued in the six months to June, 13 launched in the U.S. with two in Hong Kong, LSEG noted.

Tech companies like Grab and Sea, despite being based in Singapore, have sought American listings, with the New York Stock Exchange and Nasdaq seen by many as global markets with deep liquidity and access to an even wider breadth of investors not as readily found in the city-state.

In stark contrast, Hong Kong has surged ahead with public listings. The Chinese-ruled city's bourse booked 42 IPOs on its mainboard from January to June, coming up on the 67 listings logged for the whole of 2024 and the 68 seen in 2023, according to LSEG and PwC.

In a report this month, PwC cited Hong Kong as the top fundraising hub globally, booking 107.1 billion Hong Kong dollars ($13.6 billion) through IPOs in the first half of this year -- seven times the amount raised in the same period in 2024.

As Western markets become less inviting, Hong Kong has become the destination for Chinese companies to raise funds. Some of the biggest deals have come since Trump announced "reciprocal" tariffs in April and escalated Washington's trade war with China.

Geopolitical tensions and stricter U.S. oversight mean Chinese companies are sticking closer to home.

"Despite ongoing uncertainties, such as geopolitical tensions and trade tariffs, the high level of liquidity in Hong Kong's banking system is creating favorable conditions," said Diamantina Leong, PwC's Hong Kong capital markets services partner. "We expect 2025 to be the most active fundraising year for IPOs in the past four years."

According to Singapore bourse executives, Monday's NTT REIT listing is the largest property trust debut by funds raised across developed Asia in the last five years. "We are optimistic it will be well received by investors and it has already sparked renewed interest," Ronald Tan, SGX's senior vice president of global sales and origination, told Nikkei. "Conversations with other prospective issuers from across all sectors have picked up meaningfully and we expect more activities ahead."

Singapore in February proposed a 5 billion Singapore dollar ($3.9 billion) fund to jolt its equities market. Under the scheme, the city-state's financial regulator, the Monetary Authority of Singapore (MAS), will work with fund managers to spur investments into local stocks.

Some observers see the NTT REIT IPO as just one event on a long road to rejuvenating the Singapore market, as bourses elsewhere continue to pick up steam, setting high benchmarks for the SGX.

"A single listing is not the be-all and end-all of a stock market's worth," said Yujun Lin, CEO of trading platform provider Interactive Brokers Singapore. "What's more important is the incremental structural changes that the MAS and SGX are making, in order to rebalance the local stock market."