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Global REIT ETFs may offer better returns than S-REITs with US assets

Lewis Lim
Lewis Lim10/8/2018 07:30 AM GMT+08  • 7 min read
Global REIT ETFs may offer better  returns than S-REITs with US assets
SINGAPORE (Oct 8): The real estate investment trust sector in Singapore has been one of Singapore Exchange’s runaway success stories. The S-REIT sector is the sixth largest in terms of market cap globally and third largest in Asia, trailing behind Japa
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SINGAPORE (Oct 8): The real estate investment trust sector in Singapore has been one of Singapore Exchange’s runaway success stories. The S-REIT sector is the sixth largest in terms of market cap globally and third largest in Asia, trailing behind Japan and Australia. Based on the latest available data, there are 11 ­S-REITs with all-overseas assets in their portfolios. They include Manulife US REIT and Keppel-KBS US REIT. Two more pure-play US REITs are likely to list in Singapore in the near future. Prime US REIT plans a listing before year-end, and an ­Ascendas-Singbridge-sponsored REIT with US assets could list early next year.

Yet, with perhaps the exception of Frasers Logistics & Industrial Trust, the yields of the foreign-asset REITs continue to trade at a discount to pure-play S-REITs with local assets. Pure-play Singapore-focused REITs are getting rarer, with only 10 left out of 40 listed S-REITs. Of these, two ­industrial REITs plan to merge, and of the remainder, just five or six are seen as attractive for institutional investors. Large-cap S-REITs with well-known sponsors and a modicum of foreign assets have also traded well. Market watchers attribute the outperformance of locally focused S-REITs to the investment mandates of institutional funds. The largest funds out of North America and Europe buy into S-REITs for their Asian assets.

Investors looking for exposure to the US REIT market are spoilt for choice. If they intend to hold a diversified portfolio of ­REITS, there are plenty of REITs around the world that deliver returns superior to those of S-REITs with foreign assets.

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