Singapore has established itself as a hub for real estate investment trusts over the past two decades. Now, following the initial blow from the Covid-19 outbreak, its REITs are slowly coming back to the market with a mission: resume their global expansion.
Gordon Tang and his wife Celine, who have one of the biggest REIT stakes in Singapore, are among those leading the charge. Suntec Real Estate Investment Trust, of which they own about one-tenth, completed the acquisition of a 50% holding in a London property last month, finalizing a 430.6 million pound ($761.7 million) deal that had been put on hold with the pandemic.
Lippo Malls Indonesia Retail Trust and IREIT Global, in which Chinese tycoon Tong Jinquan owns stakes of more than 4.8%, are raising money to fund acquisitions in Indonesia and Spain. Keppel REIT and Ascendas REIT both bought office properties in Australia in September.
Like many other industries, REITs have been hit hard during the pandemic. More than US$340 billion ($464.48 billion) of value has been wiped out this year from an index tracking them globally as employees emptied out offices in major cities and shoppers turned to e-commerce. For retail and office properties in financial centres from New York to London and Paris, the future remains grim as companies order employees to stay home and restrictions on movement are reintroduced to prevent a winter surge in cases. Only 15% of office workers in New York are projected to return by the end of 2020.
But even with Covid-19 resurging in most of Europe and the US, some REITs are already betting that prime properties around the world will eventually rebound and are looking for distressed opportunities.
For trusts in Singapore, which houses the most REITs in Asia excluding Japan, transactions are slowly picking up, boosted in part by lower financing costs. Most of the $3 billion in deals announced since January happened in the third quarter, DBS Group Holdings Ltd. said in a note on Sept. 29 titled “S-REITs: Insatiable growth appetite.” It added that the market should keep improving through the rest of the year and start of 2021, and analyst Derek Tan expects more acquisitions as the coronavirus crisis dissipates over time.
“Pandemic-related distress sales mean some good opportunities for Asian money accessing the overseas market,” said Patrick Wong, a senior analyst at Bloomberg Intelligence. “More transactions are expected to come in.”
Mapletree Logistics Trust is among those that have recently restarted their overseas push. It’s spending $1.09 billion for real estate in China, Malaysia and Vietnam.
Frasers Logistics & Commercial Trust, controlled by Thailand’s richest person, Charoen Sirivadhanabhakdi, said in August it will acquire properties in Australia and the UK for about $90 million. He’s looking for purchases even as his fortune has dropped more than US$9 billion this year to US$10.4 billion, according to the Bloomberg Billionaires Index.
The Tangs’ wealth has also suffered, with the combined value of their holdings in three REITs currently traded down US$234 million for 2020 to US$519 million. That’s even despite a US$40 million rebound since the end of March, according to data compiled by Bloomberg.
In addition to the stake in Suntec REIT, the Tangs control SingHaiyi Group Ltd., a developer that has expanded to the US and Australia, and have holdings in OUE Commercial REIT, which owns properties across Singapore and Shanghai, and Cromwell European REIT. Eagle Hospitality Trust, another of their investments, has been suspended since March as its manager defaulted on a US$341 million loan.
Frasers Logistics declined to comment for this story.
“Notwithstanding Covid-19, we believe that London will continue to be a key global market where good quality assets are well sought after,” said Chong Kee Hiong, chief executive officer of ARA Trust Management (Suntec) Ltd., the manager of Suntec REIT, when referring to the recent purchase of London’s Nova development. “Yield accretive, well located, high quality assets in key cities were our acquisition criteria. The Nova Properties satisfied these requirements fully. We are confident that these assets are well placed to enhance the income stability of our REIT.”
Since the first Singapore listing of a trust in 2002, the market has grown exponentially. The city-state has 44 REITs and property trusts with a combined market value of $101 billion, according to a Singapore Exchange Ltd. report in October. Last year, almost 45% of the world’s REIT initial public offerings debuted there, surpassing places such as the US, Australia and Japan, the bourse said.
The city-state’s tax incentives, regulatory support and increasing appetite from investors due to their high dividend yield -- 6.8% as per the Singapore Exchange report -- have made it a powerhouse for REITs, Bloomberg Intelligence’s Wong said.
“Singapore has attracted a number of REITs with global assets over the past few years,” he said. “This creates a critical mass to further attract more similar REITs to get listed in Singapore instead of other Asian markets like Hong Kong and Japan.”
Due to the scarcity of land in the island, the trusts have long turned to overseas for growth. More than 80% of Singapore’s REITs and property trusts have invested in assets abroad, the exchange’s report showed. Australia is a key market, with the number of transactions to the country climbing 72% in the first half of the year even as their amounts remained low, according to real estate consulting firm Knight Frank LLP.
That said, it’s not just about expanding abroad. The domestic market is also looking promising as Singapore REITs are poised to benefit from Chinese companies setting up their base in the island. ByteDance Ltd., the owner of video app TikTok, is moving to One Raffles Quay, owned by Suntec REIT, while Alibaba Group Holding Ltd. acquired a 50% stake in AXA Tower in May and will be an anchor tenant of the building located in the city’s financial district.
“The interest in the acquisition as well as the occupation of commercial properties by technology firms are anticipated to increase in the year ahead,” Knight Frank noted in its third-quarter research report.