Tesco Lotus plans property fund IPO
Tesco Lotus yesterday plans an initial public offering (IPO) for a property fund, deemed the biggest ever with the value of Bt14 billion.
With an appraised value of more than Bt14 billion, the fund will initially comprise 15 existing shopping malls, each anchored by Tesco Lotus hypermarkets, in prime locations both in Bangkok and the provinces, as well as freehold land and ground leases.
Sompong Rungnirattisai, property director of Tesco Lotus, said that the application to establish the property fund named 'Tesco Lotus Retail Growth Freehold and Leasehold Property Fund' was filed yesterday with the Securities and Exchange Commission (SEC). The IPO process will start in the next few months.
Tesco Lotus has appointed Krung Thai Asset Management as its property fund manager and Phatra Securities as its domestic book runner.
Without a guarantee of minimum return to individual investors, it will be Thailand's largest property fund IPO 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 approval by the SEC and subject to market conditions.
He said Tesco Lotus would hold up to 33 per cent of the units of the property fund, in compliance with regulations. It is also the company's intention to open the IPO to both institutional and retail investors.
Tesco Lotus will continue to lease areas for hypermarkets in the 15 shopping malls from the fund.
"We are very excited about the growth opportunity in Thailand and this announcement today for the property fund has confirmed our commitment to Thailand for the long term," said Chris Bush, chief executive officer of Tesco Lotus.
"The property fund provides an opportunity for us to invest in future innovation and growth for customers. I'm delighted that it also gives our customers, staff, and business partners and stakeholders a way to participate in Tesco Lotus' growth and success," said Bush.
He said that money raised by the property fund would be re-invested in Tesco Lotus' distribution network, refurbishing its existing stores, including hypermarkets and Express outlets, and in new stores. Altogether they require about Bt7 billion capital for investment per year.
Bush gave the example of Tesco Lotus' refurbished store on Rama 4 Road, which has been changed into the 'Extra' concept, and has seen a 20-per-cent increase in customer traffic after its relaunch a few months ago.
Tesco Lotus now operates about 800 retail outlets in Thailand in various formats, including hypermarkets, Talad Lotus, and Express stores, located in 60 provinces throughout the Kingdom.
The company employs 37,000 people and serves 35 million Thai customers every month. The company has already invested more than Bt130 billion in the Thai economy over the past 17 years with more than Bt136 billion worth of products purchased from vendors in 2010.
He said that between five and eight new Tesco Lotus hypermarkets would be opened next year, besides expansion of its Express and Talad stores.
Bush said that 15 shopping malls is a good number to start the property fund with, covering prime sites in Bangkok and upcountry.
The launch of the property fund is part of Tesco Lotus' expansion plan in Thailand.
