Asian real estate investment trust market picked up at the end of last year and new listings expected in 2010, report shows

Written by Ray Clancy

Monday, 22 March 2010 09:37

The Asian real estate investment trust market picked up in the second half of last year and should continue to improve this year, according to analysts.

In particular, Reits in Singapore look like they are making better progress in resuming growth, compared with their counterparts in the region, the report from property consultants CB Richard Ellis shows.

This year could also bode well for new Reit listings. ‘2010 will probably see the resumption of the initial public offering (IPO) market for Reits, said CBRE Research Asia executive director Andrew Ness.

In the second half of 2009 the total market capitalisation of Asian Reits rose 17.6%, the report shows. Most Reits in the region managed to emerge from the credit crisis relatively unscathed, having raised funds from rights issues or rolled over their debts.

But some Reit markets went through a greater shake-up than others. In Japan, consolidation became the order of the day as four mergers took place. One of these involved the merger of Advance Residence Investment and Nippon Residential Investment, as the latter’s sponsor went bankrupt.

Reits in Singapore and Hong Kong managed to withstand the storm better, even outperforming the main stock indexes in their markets. Between July and December last year, the FTSE ST Reits Index rose some 38%.

‘Generally well managed by professional managers, S-Reits are unlikely to go under. While their price movements can be volatile, S-Reits are considered a fairly safe haven in the long term,’ the report says.

Although stock market conditions in Asia improved in the second half of last year, they were not attractive enough for most sponsors to set up and list a Reit. Just four new real estate funds went public in Thailand, according to CBRE.

But listing activity could return this year and analysts believe that several new S-Reit listings could be in the pipeline. One is Cache Logistics Trust, being set up by ARA Asset Management and logistics firm CWT. The Reit will start with six properties worth about $730 million in its portfolio.

ARA also said in December last year that it is working with Regency Group to list a Syariah-compliant Reit in Singapore. The Reit could be listed in the second half of this year and could hold some $1 billion worth of properties, largely from the hospitality sector in Qatar. Thailand could see more property funds going public this year, CBRE said.

Meanwhile, existing Reits could focus on buying assets and growing distributable income. ‘Further acquisitions are likely in the coming year as Asian Reits look to enhance their portfolio quality ahead of the full recovery of the real estate market,’ Ness said.

Already, some S-Reits have been building up their portfolios. Last month, for example, CapitaMall Trust agreed to buy Clarke Quay for $268 million, and Ascendas Reit said that it would buy three properties for $228.5 million.