REITs Center

The Ministry of Finance (MOF), the Inland Revenue Authority of Singapore (IRAS), and the Monetary Authority of Singapore (MAS) today announced new measures to provide real estate investment trusts listed on the Singapore Exchange (S-REITs) with greater flexibility to manage their cash flows and raise funds amid a challenging operating environment due to COVID-19. These comprise an extension of the deadline for distribution of taxable income by MOF and IRAS, as well as a raising of the leverage limit and deferment of new regulatory requirements by MAS. 

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The impact of the pandemic has been pervasive with economic dislocations now reverberating across the world, hitting consumption, tourism, and supply chains. Financial market volatility has also increased with equity prices dragged lower through 2020. While REITs have not been spared in the current selloff, the recent price drops have upped the distribution yields of the region’s REITs, which rose to 4.4% in February, from 4.0% in January, according to the GPR/APREA Composite REIT Index. Yields for Singapore REITs rose 0.3 percentage points to 5.3% in the same period.

• The impact of the pandemic has been pervasive with economic dislocations now reverberating across the world, hitting consumption, tourism, and supply chains. Financial market volatility has also increased with equity prices dragged lower through 2020.
• While REITs have not been spared in the current selloff, the recent price drops have upped the distribution yields of the region’s REITs, which rose to 4.4% in February, from 4.0% in January, according to the GPR/APREA Composite REIT Index.
• Historically, returns for REITs have demonstrated lower volatility over the longer term, supported by their stable dividend pay-outs. The main reason is that the overall performance, especially for office and industrial, is tied to relatively long-term leases.

SEBI rolled out REIT Regulations in September 2014 (“REIT Regulations”). Of the Grade A office space stock of over 500 msf in India, as per JLL Research, 294 mn sq. ft. of office space stock would be eligible for REIT in India. This would translate to potential investment of USD 35 bn.

• The number and value of raisings in Australia has already exceeded what took place in the aftermath of the 2008-09 global financial crisis.
• Singapore has seen transactional activity and liquidity rise in the last two years, and an increase in cross-border activity has compressed yields.

• Hyderabad recorded the highest office net absorption in 2019 (as a proportion of existing stock), while it is also among the world’s best-performing cities for prime office rental growth.
• APAC-focused managers are finding the largest returns in distressed opportunities – with the strategy also exhibiting a lower risk profile than opportunistic funds (the most capitalized strategy). Meanwhile, debt and fund of funds vehicles have exhibited the lowest variation in returns.

• In the third quarter of 2019, almost $8 billion from global investors flowed into the region.  
• In Q3, the percentage of cross-border capital in Asia Pacific jumped to a decade-high of 36% over a one-year horizon.
• However, the declines in domestic investment activity have been taking place for the last four quarters.

• Asia Pacific retail rental for prime shopping centres remained stable in the third quarter of this year. The Asia Pacific Retail Rental Index has seen 0.1% growth in the previous quarter.
• Asia Pacific residential markets were in a mixed trend. Manila saw the highest quarterly price growth in the third quarter this year and last year as well.
• Bengaluru-based real estate firm Embassy Property Developments plans to sell as much as Rs 6,500 crore to Embassy Office Parks REIT as India’s first listed real estate investment trust.

• In Q2, the proportion of cross-border capital in Asia Pacific dropped to 30% from 41% in the first quarter of 2019. The major driver behind this was a slowing from U.S. and European players.
• Singaporean investors became the largest Asian investor group in the region, followed by China.
• With improving fundamentals, Thailand’s property market will continue its growth trajectory but accompanied by challenges like new mortgage regulations and slowdown in growth of international arrivals.

• As the world‘s largest repository for storing and processing data, Singapore becomes a globally popular data centre investment hub. Singapore data centre REIT provided attractive returns up to 51 per cent returns by Keppel DC Reit to the investor.
• The long-awaited first Philippine REITs is imminent to be listed by year ends as the government has agreed to relax the law’s restrictive rules in a decade after the law was passed by Congress in 2009.