Saturday, 21 January 2017

Which REIT managers are creating the most value for investors?

 The external manager model adopted by most locally listed trusts is not common in more developed markets such as the US and Australia, and the managers of some successful REITs here have been able to make fortunes for themselves.

However, valuations that managers garner in a transaction, to the extent that they are known, vary widely.

Saizen REIT’s manager, for example, is being sold at a seemingly low price because it is not actually managing any assets.

On the other hand, while Croesus Retail Trust (CRT) has been reporting stable distributions per unit since its listing in 2013, its units traded at relatively high yields because local investors were not familiar with its retail malls in Japan.

The managers that never get transacted are those that run the biggest and most successful REITs in the market, such as CapitaLand Mall Trust (CMT) and CapitaLand Commercial Trust (CCT).

These managers also seem to charge relatively low fees.

For instance, CCT paid asset and property management fees totalling only $21.7 million last year, equivalent to just 0.25% of its assets under management of $8.5 billion.

By comparison, Cambridge Industrial Trust — with an asset size of $1.4 billion — paid asset and property management fees of $9.17 million for the July-to-September quarter alone.
REIT investors should perhaps ask themselves which managers are creating value for them, and which are not. 

Sunday, 25 December 2016

Singapore Office Rents to Rebound End-2017

Singapore’s office rents will remain “a little soft” in 2017 and may pick up only at the end of the year when the amount of new supply of space shrinks, according to CapitaLand Commercial Trust, one of the city-state’s biggest landlords.
About 2.3 million square feet of space were added this year, driving rents down by 15 percent, said Lynette Leong, chief executive office of the real estate trust’s manager. Less than 500,000 square feet are being planned annually starting in 2018, with no supply in sight from 2020, she said in an interview with Bloomberg Television on Tuesday.
Given that there’s still some new supply coming on stream next year, we foresee that rents will remain a little soft,” Leong said. “However, it should recover by the end of the year given that there’s very little new supply over the years ahead.
Office rents in the city’s central area fell for the past six quarters, according to data from the Urban Redevelopment Authority, matching the longest stretch of declines since the global financial crisis as banks reduce their workforce.
The period of lower supply from 2018-2019 will help the office market recover, Derrick Heng, an analyst at Maybank Kim Eng, said by phone. "Our call is that there will be a bottom between late 2017 and early 2018 and rents will recover beyond that."

Shares Gain

CapitaLand Commercial shares have gained 11 percent this year, compared with the 2.7 percent increase on the city-state’s real estate investment trust index tracking 32 stocks. The REIT that’s partly owned by CapitaLand Ltd., Southeast Asia’s biggest developer, owns buildings such as Capital Tower and CapitaGreen in the city’s financial district.
“Singapore is not just reliant on the financial services and banks,” Leong said. ‘There are other sectors that have become more active, some examples are technology companies -- we’ve got the Facebooks and Amazons of this world.”
The trust is planning to redevelop a parking structure called Golden Shoe Car Park in the financial district into an office building, where it will add 1 million square feet of space in 2021. “We believe that will be the next wave of the office-market cycle,” she said.

Thursday, 20 October 2016

Singapore REITs Turn From Worst to First ?

Except for REITS sector, not many bright spots now in Singapore stock market. 

Offshore and Marine sector is still struggling through the tunnel. No light yet. As a result, banking sector is affected by bad loans and also sluggish economy growth. Telcos are facing potential competition. SPH posted double digit percentage income decline, so is SGX.  ...

However, with interest rate rising, challenging demand/supply dynamic, volatile exchange rates, sluggish world economy,  will S-REITS ride the storm unharmed? For the whole sector, maybe. But be careful of some particular counters. Right now it is time to either flight to quality, or hold cash. 

(Bloomberg) -- Singapore real estate investment trusts have gone from last year’s biggest losers to this year’s best performers as their world-beating yields attract investors including BNP Paribas Investment Partners to Samsung Asset Management.
Singapore REITs, which mostly invest in malls, offices and industrial buildings, offer the highest dividend yields among developed markets, according to data compiled by Bloomberg. That’s propelled a 8.9 percent increase in the FTSE Straits Times Real Estate Investment Trust index this year as yield-hungry investors flock to the offerings amid record-low interest rates.
“We’re overweight on Singapore REITs,” said Jan Willem Vis, Amsterdam-based senior portfolio manager at BNP Paribas. “They’re attractively valued compared to other markets. REITs are a very good alternative to bonds and they pay sustainable dividends.”
International investors including BNP, Bank of New York Mellon Corp. and Samsung Asset have accelerated purchases of Singapore REITs since June, amid growing expectations central banks will keep interest rates lower for longer. Fund managers have bought 217.84 million units in the five biggest Singapore-listed REITs, the data showed.
The 7 percent yield offered by Singapore REITs, exceeds 6 percent for those listed in Australia and the U.S. and Japan’s 4 percent, according to data compiled by Bloomberg. The buying has helped the FTSE Straits Times Real Estate Investment Trust index erase most of 11 percent slump last year, when it was the worst performer among REITs listed in Australia, the U.S., Japan and Europe. This year, the Singapore REIT index has beaten all those peers.
Rent Increases
“We like industrial REITs as we’re still seeing upward rental reversions for industrial and business parks,” said Alan Richardson, a Hong Kong-based fund manager at Samsung Asset, which manages about $169 billion globally. “I don’t see much downside risks for Singapore REITs even if interest rates start going up.”
Owners of industrial buildings and business parks are benefiting from demand for office space from bio-medical and social media companies, said Richardson. Samsung, BNY Mellon and Schroders Plc were among the buyers of Ascendas Real Estate Investment Trust since June, according to data compiled by Bloomberg.
Ascendas REIT has climbed 7 percent this year, while Mapletree Industrial is up 13 percent.
The city-state’s REITs have also beaten the benchmark Straits Times Index, which has declined 1.8 percent this year. Singapore 10-year government bonds yielded 1.87 percent as of Oct. 18.
Five-year bond yields are below zero in Japan and parts of Europe, including Switzerland and Italy, as central banks turn to negative rates to bolster sluggish economies.
Tenant Demand
Singapore REITs are being supported by tenant demand. Rents in business parks will hold up as additional supply is mostly already leased, while hospitality REITs will benefit from a rise in tourist arrivals. Office rents are expected to recover next year after a 10 percent to 15 percent decline this year, said Vikrant Pandey, an analyst at UOB Kay Hian Pte.
“Singapore REITs are attractive given their high yields in a low interest rate environment,” said Kar Tzen Chow, a Kuala Lumpur-based fund manager at Affin Hwang Asset Management Bhd., which oversees about $7.6 billion. “Some are able to sustain and even distribute higher dividends given their ability to increase rents.”
Affin Hwang, which is overweight Singapore REITs, recently added shares of Mapletree Greater China Commercial Trust, which owns office and retail properties in mainland China and Hong Kong, Chow said. It also holds Frasers Logistics, Mapletree Logistics and Croesus Retail Trust, whose shares have all gained at least 4 percent this year.
“Dividends can be sustained and grown by a combination of asset enhancements, tenant mix adjustments and making earnings-accretive acquisitions,” Jason Pidcock, a London-based fund manager at Jupiter Asset Management, said by email. Jupiter Asset was the second-largest buyer of Ascendas REIT shares during the quarter, according to data compiled by Bloomberg.
Not every one is bullish on Singapore’s REITs. Daiwa Capital Markets analyst David Lum downgraded the sector to ‘neutral’ from ‘positive’ in August, saying a run up in prices had returned them to fair value. Daiwa’s main concern was the unit prices of some large-cap REITs might not be sustainable if underlying fundamentals continued to deteriorate or if bond yields rose again, Lum said in an August note.
“The chase for yield drives people into equities,” said Hans Goetti, Dubai-based chief strategist for the Middle East and Asia at Banque Internationale a Luxembourg, which manages $40 billion. “Singapore REITs offer among the highest yields. The theme remains valid as central banks remain accommodative.” 
To contact the reporters on this story: Jonathan Burgos in Singapore at, Pooja Thakur in Singapore at To contact the editors responsible for this story: Sree Vidya Bhaktavatsalam at, Peter Vercoe

Tuesday, 11 October 2016

SPH REIT -- one of the boring REITs. But income-oriented investment is not about excitement.

SPH REIT certainly qualifies as the staple in all income portfolios. Despite the headwinds in local retail leasing sector, SPH REITs, with its good properties, shall deliver stable performance. The impact of online shopping trend and tourist number dropping is overblown. 

Mid-term wise, addition of new assets could be price catalyst. Low leverage, two retail properties, full occupancy, high percentage of sponsor' shareholding, making it one of the boring REITs. But income-oriented investment is not about excitement. 

Current yield is 5.5%, making it one of the S-REITS with lowest yield, on a par with CMT. I would wait for better opportunities to add some more.  


4Q gross revenue grew 2.2% to $52.2m.

SPH REIT’s 4Q16 performance was underpinned by higher revenue and better operating margins, said CIMB.

Its gross revenue rose 2.7% yoy to S$52.2m (US$38.4m), while income distributed rose 2.1% yoy to S$35.9m (US$26.4m) on improved operating performance and higher margins, thanks to cost savings.
According to CIMB, portfolio occupancy remained full and there was a positive rental reversion of 5.4% over preceeding levels across the portfolio, of which Paragon achieved 5.2% higher rentals on 34.2% of the space renewed in FY16.

The Clementi Mall renewed 11.9% of its space with a 7.8% improvement in rents over preceding levels. CIMB believes that this bodes well for the 46.7% and 59.5% of the NLA that are due to be re-contracted in FY17-18 at Paragon and Clementi Mall, respectively.

Occupancy costs, meanwhile, rose marginally.

Tenant sales at Paragon inched up by 0.3% yoy in FY16 despite a 2.5% yoy dip in shopper footfall, while The Clementi Mall saw a 1.4% yoy retreat in tenant sales with shopper traffic slowing by 2.4% yoy.
According to CIMB, spending per shopper headcount remained relatively steady yoy, demonstrating the resilience of these two properties. As a result, occupancy costs for Paragon and Clementi Mall inched up to 19.6% and 14.8% yoy, respectively.

Looking ahead, CIMB believes ongoing asset enhancement initiatives, such as decanting and conversion of 7000sf of back-of-house space at Paragon, and creating a more efficient layout at Clementi Mall, while also increasing the number of food kiosks there, should lift revenue marginally over the next two years.
It added that with a low gearing of 25.7%, the trust is well placed, to explore inorganic growth 
opportunities, such as potential acquisition of the Seletar Mall, which is majority owned by its Sponsor.  

Thursday, 6 October 2016

SGX launches REIT Index for Asia Pacific ex Japan

useful related links: 

Singapore Exchange (SGX) on Monday launched the SGX APAC ex Japan Dividend Leaders REIT Index, comprising 30 real estate investment trusts (REITs) across the Asia Pacific region excluding Japan.

It will be the first SGX index to be used as a benchmark index for a new exchange-traded fund (ETF).
In addition, the index is the first of its kind that is composed entirely of REITs in the Asia Pacific region that are dividend weighted, as well as accessible through an ETF.
The dividend-weighted index measures the performance of REITs that pay the largest dividends within the Asia Pacific ex Japan region, providing investors with the opportunity to participate in a portfolio offering significant and sustainable yields.
According to SGX in a statement on Monday, the index’s total return over the 12 months to 29 July 2016 was 19.97%, demonstrating a yield over the same period of 4.53%.
The ETF will be issued by Phillip Capital Management, the asset management arm of Phillip Capital, and will be listed on SGX.
The SGX APAC ex Japan Dividend Leaders REIT Index captures over 70% of the region’s REIT universe by total capitalisation, taking into consideration size, free-float and liquidity.
All constituent weights are capped at 10% to ensure greater portfolio diversification. The index was designed and built using SGX’s in-house index engineering expertise, in consultation with Phillip Capital Management.
“The prospective ETF will offer investors transparent and low cost access to a diverse basket of quality REITs, many of which we have been investing in over the past decade through our actively-managed REIT funds,” says Jeffrey Lee, MD and Co-CIO of Phillip Capital Management.
“In view of the growing demand we see from our investors for sustainable income and the rise of passive investing, this is a highly opportune time to launch the first Asia Pacific REIT ETF comprising the region’s largest dividend-paying REITs,” Lee adds.
“I am delighted with the launch of our first Pan-Asian index and that it will be used as a benchmark for an ETF. As SGX’s first truly regional index, it broadens our offering beyond the Singapore equity market, demonstrating our continued push to provide investors access to diverse opportunities,” says Loh Boon Chye, CEO of SGX.
According to a PwC survey, the region’s ETF market is fast developing and poised for strong growth, with ETF assets in Asia expected to reach US$560 billion ($762 billion) by 2021.

Wednesday, 3 August 2016

MGCCT’s Q1 income spikes 11.2%

Boosted by Festival Walk, Sandhill Plaza contributions.

Thanks to increased earnings across its properties, Mapletree Greater China Commercial Trust’s (MGCCT) net property income for 1QFY17 jumped 11.2% YoY to $69.4m.

According to a report by OCBC, MGCCT’s earnings also enjoyed additional contribution from Sandhill Plaza (SP), which was acquired on 17 June 2015. Festival Walk (FW) also registered higher revenue for the quarter

Meanwhile, revenue spiked 11.2% YoY to $85m in Q1, with DPU climbing 9.1% YoY to 1.85 S cents.

On the flip side, MGCCT saw moderation in its operating metrics in Q1.

“During the quarter, management secured positive rental uplifts of 13% at FW (retail) and 11% at FW (office), while rental reversions of 6% and 28% were achieved for Gateway Plaza (GP) and SP, respectively,” OCBC revealed.

“Overall portfolio occupancy stood at 97.8%, as at 30 Jun 2016, which was relatively stable versus the 98.6% level at end 4QFY16. Both FW and SP were fully leased, but GP’s vacancy rate increased slightly from 3.2% to 5%,” it added.

Monday, 1 August 2016

15 things I learned from Mapletree Logistics Trust FY2016 AGM

Mapletree Logistics Trust (SGX: M44U) (MLT) is a logistics REIT with 118 properties in eight countries – Singapore, Malaysia, Vietnam, Australia, Japan, Hong Kong, South Korea, and China. The properties include logistics parks, distribution centres, food and cold storage, and industrial warehouses.
As you can see from the chart above, Singapore’s industrial production has been especially weak the past 12 months. I attended MLT’s annual general meeting to discover how the REIT performed over its last financial year and how the management planned to navigate the tough economic climate.
Here are 15 things I learned from Mapletree Logistics Trust’s FY2016 AGM:

  • Gross revenue and net property income (NPI) rose 6.0% and 4.8% respectively driven mainly by growth in Hong Kong. However, this was offset by weaker results from Singapore as a number of single user assets (SUAs) are being converted to multi-tenanted buildings (MTBs). Distribution per unit (DPU) fell 1.6% to 7.38 cents. In its most recent Q1 2017 results, MLT has managed to maintain its DPU of 1.85 cents for unitholders.
  • MLT’s current distribution yield (based on FY2015 DPU) is 6.83%. The current yield is near its historical high yield of 7.10% in 2008. Its historical low yield is 5.13% in 2006.
  • MLT’s net asset value (NAV) per unit fell marginally from $1.03 to $1.02 year-on-year.NAV per unit has since fallen further to $1.00 in MLT’s Q1 release. With MLT’s share price at $1.08 (as at 27 July 2016), the REIT is currently trading above book value.
  • Portfolio value grew from $4.63 billion to $5.07 billion year-on-year – largely from fair value gains from Hong Kong properties. Singapore still comprised the largest proportion of portfolio value at 34.4%, followed by Hong Kong (22.5%) and Japan (20.4%). These three countries also make the largest contributions to MLT’s gross revenue.
  • MLT’s gearing ratio is 39.6% at financial year end. This has since been reduced to 35.7% due to the issuance of S$250 million perpetual securities in May 2016. The REIT’s debt maturity profile is also well-staggered with a maximum of 17% of debt maturing in a single year over the next eight years. About 84% of debt is hedged or drawn in fixed rates.
  • MLT’s portfolio occupancy rate is 96.2% which has since fallen further to 95.4% in its Q1 release. Singapore has the lowest occupancy levels at 92.9% though, as the CEO pointed out, this number is still higher than the overall Singapore warehouse occupancy rate of 90.4%. MLT’s tenant base is also well-diversified; it has 519 customers and the top ten only contribute between 1.4% to 4.3% of gross revenue.
  • Weighted average lease expiry (WALE) is 4.5 years. Lease expiry profile is well-staggered with the majority of leases expiring in FY2021 and beyond. The weighted average landlease is 42 years with the majority (54.4%) of land leases expiring in 31-60 years. Only 4.7% of land leases expire in the next 20 years and 28.6% of MLT’s properties are actually freehold (none in Singapore, of course). This gives a measure of long-term stability to MLT’s property portfolio.
  • One investor made a point that although gross revenue and NPI have increased, unitholders ultimately look at DPU – and MLT’s was decreasing. He then asked the management if they had any strategy to navigate the current difficult conditions. MLT chairman Paul Ma agreed that current conditions are tough especially in Singapore and that the board has taken steps to cushion the slowdown. He mentioned that MLT has diversified its portfolio and without doing so, results could have been much worse. He used Hong Kong as an example where demand for warehouse space is still strong and MLT has seen positive rental reversions. Besides diversification, the REIT is also looking at divesting older assets that no longer fit the portfolio criteria and embarked on redevelopments for assets like 5B Toh Guan Road East and 76 Pioneer Road.