Singapore investors came to know Urban Commons because it was a sponsor to a short-lived stapled security Eagle Hospitality Trust (EHT), and almost all of them are unhappy at the way developments unfolded at EHT and its manager. Whether the collapse of EHT, suspension and eventual delisting of EHT units impacts the Singapore Exchange (SGX) as a hub for REIT listings with overseas assets remains to be seen.

It is also unclear whether promoters and sponsors could continue to use EHT’s model to reap financial benefits for themselves. The attraction of the SGX and the S-REIT model as a listing venue for REITs and business trusts is the external manager model, where the promoter or sponsor is paid a fee through its ownership of the REIT manager. Sponsors can control their REITs with just 20% ownership — in some cases less — and through controlling the manager.

From day one of trading in EHT units, one of the investment banks underwriting the IPO, Bank of America, sold its stake at 73 US cents ($0.98). This was below the IPO price of 78 US cents. EHT’s IPO price was purportedly at a discount to its IPO net asset value of 88 US cents. In the end the NAV turned out to be an engineered NAV with financially engineered valuations, making EHT one of the most obvious financially engineered REITs to be listed on SGX — but not the only one.

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