Tag: Ascendas REIT

  • A Battle of 2 of Singapore’s Largest Real Estate Investment Trusts

    A Battle of 2 of Singapore’s Largest Real Estate Investment Trusts

    Singapore’s stock market is gaining popularity as a centre for real estate investment trusts.

    The first REIT here appeared some time back in 2002. But even in recent years, Singapore has seen the listing of some huge billion-dollar REITs such as Frasers Logistics and Industrial Trust.

    In this piece, I want to take a look at two of the largest REITs listed here in Singapore and compare them. Meet the contenders, CapitaLand Mall Trust and Ascendas Real Estate Investment Trust.

    Asset class

    The most obvious difference between the two REITs is their area of focus. CapitaLand Mall Trust, as its name suggests, focuses on retail properties (it dabbles a little in some commercial assets as well).

    Ascendas REIT on the other hand, deals with industrial properties such as business & science parks, factories, data centres and more.

    Going international

    Another area of divergence between the two is their geographical focus.

    Ascendas REIT has invested in overseas properties over the years and now has assets in China and Australia. It seems the trust would continue to pursue international investments going forward. Today, Australia and China contribute roughly 11% and 2%, respectively, to the REIT’s overall portfolio value. The rest comes from Singapore.

    CapitaLand Mall Trust, on the other hand, only owns properties in Singapore. That said, it also has a 14.55% stake in CapitaLand Retail China Trust, which invests in retail properties in the Greater China region.

    Both CapitaLand Mall Trust and CapitaLand Retail China Trust are sponsored by the local real estate giant CapitaLand Limited.

    CapitaLand has stakes in other REITs and even private property funds that invest outside Singapore. This means that CapitaLand Mall Trust would most likely not invest directly in international markets since its sponsor would be heading any overseas venture.

    A long history

    Now, CapitaLand Mall Trust and Ascendas REIT do have things in common.

    They mostly have assets located in Singapore; they have market capitalisations of around S$7.0 billion each; and they both were listed in 2002 and so have long histories of growth as a listed REIT.

    Since their IPOs, CapitaLand Mall Trust and Ascendas REIT have generated total returns (where gains from reinvested dividends are factored in) of more than 420% and 554%, respectively.

    Summary

    Both Ascendas REIT and CapitaLand Mall Trust have proven themselves in the market by providing strong returns for their unitholders. But, the two trusts have significant differences related to their asset classes and growth strategies. This thus results in different risk profiles and that’s something investors would have to keep in mind.

  • REITs set to outperform equities as investors go in search of yields

    REITs set to outperform equities as investors go in search of yields

    The Stock Exchange of Thailand continues to stay in positive territory, gaining around 7 per cent year to date, despite the sluggishness over the last two weeks. Nevertheless, the SET Index still failed to breach the psychological 1,400 level.

    Month-to-date, the market leaders were PTT, PTT Global Chemical, Siam Cement, Charoen Pokphand Foods and CP All. The laggards were Bumrungrad Hospital, Advanced Info Service, U City, Banpu and Minor International.

    Foreign investors bought Bt11.7 billion worth of Thai shares from March 1-17, leaving the year-to-date net-buying position at Bt3.6 billion.

    Since the beginning of the year, the performance of real estate investment trusts (REITs) has been well ahead of equities. We believe the trend will continue as global investors seek yields amid negative interest rates in both Europe and Japan, coupled with low rates elsewhere (including Thailand).

    On average, equity returns in developed markets remain in the red to the tune of minus 3 per cent year to date. In contrast, emerging-market stocks outperformed their developed-market peers with a year-to-date gain of around 3 per cent.

    Interestingly, global REIT prices have surged on the back of investors seeking yields and the US Federal Reserve’s decision to delay its rate increases in 2016. The S&P Global REIT, which is a benchmark of publicly traded equity REITs listed in both developed and emerging markets, has risen by almost 6 per cent since the beginning of the year.

    Going forward, REITs remain appealing on a selective basis given their high yields and resilient revenue streams.

    The top 5 REITs recommended by the DBS REIT team in Singapore are (1) Mapletree Greater China Commercial Trust; (2) Frasers Centerpoint Trust; (3) Ascendas REIT; (4) CapitaLand Retail China Trust; and (5) Mapletree Logistics Trust.

    These REITs are expected to pay regular dividends, with potential for further growth arising from the expansion of their asset portfolios. Their yields range from 6 to 8.4 per cent.

    Investing in REITs comes with risks, and we advise investors to study our research reports on REITs before making any investment decision.

    Tisco Securities

    The Stock Exchange of Thailand may soon re-test the 1,400 points resistance level after the US Federal Open Market Committee left interest rates unchanged, as expected, but cut the number of planned increases this year to two from four previously.

    The Fed’s dovish stance weakened the dollar |but helped boost appetite for risk assets including Asian currencies and equities. Also positive for the |Thai market is the recent strong rally in global oil prices.

    Nonetheless, we remain cautious on the SET’s |outlook this year and anticipate heavy profit-taking above 1,400 points. Foreign-investor positioning remains very underweight (at 29 per cent, an 11-year low).

    The key concerns of clients, expressed during |our trip to Europe last week, were the same: slow |economic recovery, high household debt and low industrial capacity utilisation. These factors, coupled with persistently weak exports and worse-than-expected drought, are likely to lead to a downgrade of the 2016 GDP growth forecast when the Bank of Thailand’s Monetary Policy Committee meets on Wednesday.

    We continue to favour tourism plays such as AOT (Airports of Thailand), AAV (Asia Aviation) and BA (Bangkok Airways) after February data showing a 16 per cent year-on-year rise in foreign tourists to a new monthly record of 3.1 million. Chinese tourists led the way, with 23 per cent year-on-year growth, but the most interesting part of the data was the 14.3 per cent year-on-year jump in arrivals from Russia – the first positive figure in nearly two years.

    In the banking sector, TCAP (Thanachart Capital) remains a mid-term “buy” on recovery of legacy non-performing loans and auto-loan quality, NIM (net interest margin) expansion, tax shields to improve RoE (return on equity) and capital/LLR (loan loss reserve) buffers from the second half of 2015 to the first half of 2018 and superior dividend yield.

    We also have a “buy” rating on TMB due to its solid growth prospects and lower cost of funds backed by its increasing penetration of the SME (small and medium-sized enterprises) segment.

    Elsewhere, we have revised up our target price for ROBINS (Robinson Department Store) by 8 per cent to Bt52 after its chief executive officer’s surprise announcement that the retailer is on track to achieve 4 per cent SSSg (same-store sales growth) in the first quarter of 2016.

    This is mainly due to its flexible product-mix strategy and strong performance of its Lifestyle Centres. With the expansion of Lifestyle Centres (two more were opened in the fourth quarter of 2015), ROBINS now derives 45 per cent of its net profit from rental space.

  • Singapore investors buy record US$26.3b of overseas properties in 2015

    Singapore investors buy record US$26.3b of overseas properties in 2015

    Singapore-based investors purchased a record US$26.31 billion (S$37.83 billion) in overseas real estate in 2015, up 49 per cent from US$17.63 billion in 2014, going by preliminary data compiled by real-estate data and analytics firm Real Capital Analytics (RCA) as at Jan 12.

    The increase reflects Singapore investors’ strategy of targeting the world’s most liquid markets to diversify and grow their portfolios in the low-interest-rate environment.

    Last year’s record level of deals was boosted by big-ticket purchases by heavyweights such as GIC and Global Logistic Properties (GLP); however, mid-sized and smaller property purchases were also made by Singapore developers and family offices increasingly turning overseas in the face of a dour outlook for real estate at home, with the imposition of property cooling measures.

    RCA’s numbers may be updated as more transactions come to light.

    Globally, Singapore ranked as the fourth-largest cross-border property investor in 2015, the same as in 2014.

    US buyers were the most active in 2015, pouring US$58.74 billion in capital outside their borders; they were followed by their counterparts in Canada (US$32.17 billion) and Hong Kong (US$31.44 billion). China was in fifth position, at US$23.35 billion.

    Marc Giuffrida, executive director of global capital markets (Asia) at CBRE, said it was not surprising that Singapore-based investors emerged the fourth largest cross-border investors of real estate: “Singapore is a relatively small country, but has a relatively large wealth pool to invest – not just sovereign wealth, but corporates, families and private wealth. So there are only so many opportunities for them to put that money to work in Singapore.”

    The overseas property investment brigade from Singapore last year was led by bigwigs GIC, GLP, Temasek Holdings, Mapletree, ARA Asset Management Group and Ascendas Real Estate Investment Trust.

    RCA’s database covers only transactions above US$10 million in various asset classes, including development sites, office, industrial, retail, apartment, hotel and serviced apartments.

    The US$26.31 billion that Singapore investors ploughed into overseas real estate last year was six times the US$4.24 billion figure for 2009, when central banks embarked on the first round of quantitative easing, noted Petra Blazkova, senior director of analytics for the Asia-Pacific at RCA.

    The firm’s analysis also showed that the US$26.31 billion comprised 126 completed transactions, compared with 139 deals in 2014 and 26 in 2009. RCA also noted that there were 68 Singapore-based investors active overseas in 2015, almost double the 33 five years ago.

    Ms Blazkova said: “As more Singaporean investors look abroad to diversify a growing pool of domestic wealth, they have been drawn to offshore opportunities in real-estate markets that offer stable fundamentals, regulatory support and market transparency.”

    Historically, Singapore investors have been interested in the familiar Chinese property market. It was the top destination for Singaporean capital, attracting about US$25.87 billion of investment from 2009 to 2015. The next most popular destination was the US, which drew US$20.29 billion from the island-state’s investors during the same period, followed by Australia (US$15.35 billion), the UK (US$10.80 billion) and Japan (nearly US$7.1 billion).

    For 2015 itself, the US was the top investment destination for Singapore investors in search of overseas property; the US$14.76 billion they invested there was boosted by mega acquisitions by the likes of GIC and GLP in the industrial property sector. This resulted in industrial property being the most sought-after property class overseas among Singapore investors, drawing US$13.92 billion last year.

    A joint venture between GLP and GIC purchased Blackstone’s Indcor portfolio of 117 million sq ft across the US for slightly over US$8 billion; GLP also paid US$4.52 billion for a portfolio of industrial properties in the US which it acquired from Industrial Income Trust.

    In Australia, Ascendas Real Estate Investment Trust picked up a portfolio of 26 logistics properties for A$1.01 billion from GIC and Frasers Property Australia.

    Office and retail property remained popular among Singapore investors; they bought US$5.45 billion worth of office property and US$3.15 billion in retail property overseas last year.

    Of note was GIC’s purchase of a US retail portfolio comprising five malls from Macerich, said RCA.

    While Singapore’s overseas property investments have expanded over the past few years, the inflow of foreign capital into the Singapore property market remained stable at US$3.51 billion last year. This was in line with most of the previous years, with the exception of 2014, when the figure fell to US$1.22 billion.

    Ms Blazkova said: “Chinese investors maintained their lead as the largest source of foreign capital investing in Singapore property, accounting for US$1.03 billion of properties and development sites purchased in 2015.

    “That said, one of the largest sales of Singapore property to a foreign entity also took place in 2015, when a development site in Paya Lebar was acquired for total of US$1.28 billion by a joint venture between Abu Dhabi’s sovereign wealth fund Abu Dhabi Investment Authority and the Australian developer Lend Lease.”

    Apart from this transaction, China’s MCC (China Metallurgical) and Hao Yuan Investment group were the most active foreign investors in Singapore’s real estate market last year.

    Ms Blazkova noted that between 2011 and last year, the preferred route for foreign investors looking to access real estate in Singapore was by purchasing a development site. During the period, they picked up almost US$8 billion of development sites, accounting for 58 per cent of inward investment into Singapore real estate.

    Market watchers said this is partly due to the ease and transparency of the tender process when it comes to buying land at state tenders as well as a dearth of completed investment-grade properties available for sale, as most owners are long-term holders. Moreover, profit margins from property development are typically higher than rental yields.

    Mr Giuffrida of CBRE highlighted a recent trend of more transactions in the lower price bracket of, say, below US$100 million. This segment is starting to attract keen interest from smaller developers, family offices and private wealth on the lookout for opportunities, particularly for yield plays.

    For this year, he predicts two key trends for global cross-border property investments:

    The first is heightened interest in smaller-ticket deals from Asian investors, including Singaporean investors. The second trend is that more investors will move outside core locations. “In the Australian context, if they were previously looking at downtown CBD office buildings, now they are prepared to look at city-fringe locations.

    “In Europe, they might have previously focused on Central London office buildings, development sites and hotels; now they are looking at regional UK and branching into continental Europe.”

    Greg Hyland, head of capital markets, Singapore at JLL, said: “London is still a very important market, but there is an element of caution because of price appreciation; so investors may see better value in continental Europe – for example, Germany, Portugal, Italy, Spain and France.”