CapitaLand has been something of a spectator to the upheavals in the S-REIT sector in the past two years but the way in which their REITs are managed should be an example for other sponsors. While the Singapore Exchange and investment bankers particularly from DBS Bank have held up S-REITs as one of the SGX’s success stories, S-REITs have faced problems and corporate governance issues aplenty in the last couple of years.

The biggest blot on the S-REIT landscape is Eagle Hospitality Trust and its sponsor Urban Commons which raised US$565 million ($768 million) in an IPO. The IPO monies were based on valuations of assets with long master leases from Urban Commons which the latter appears to have no intention of honouring. Within months of its IPO in May 2019, EHT was suspended and an investigation involving the Commercial Affairs Department (CAD) is underway.

More recently, Lippo Mall Indonesia Retail Trust (LMIRT) announced an acquisition that would cost more than the REIT’s market capitalisation. Back in 2018, OUE Commercial REIT had announced a dilutive rights issue and an acquisition that was value-destroying. OUE Commercial REIT’s sponsor is OUE, controlled by the Riady family. Similarly, LMIRT’s sponsor is Lippo Karawaci, which is also controlled by the Riady family. “Remind me never to invest in a Riady-related REIT,” a former LMIRT unitholder remarked recently.

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