Moody’s expects continued growth in S-REITs

Moody’s Investors Service expects continued growth in Singapore Real Estate Investment Trusts (S-REITs) this year in an environment of low interest rates, supportive capital markets and improved economic sentiment.

In a special report, Moody’s associate analyst Alvin Tan said the S-REITs will use their well-capitalized balanced sheets to fund their acquisitive growth strategies this year.

The report looks at three sectors – office, retail and industrial – in detail.

Mr Tan said his ratings for the S-REITs take into consideration that they will fund their purchases with a mixture of debt and equity while maintaining gearing within targeted limits.

Low interest rates are expected to continue this year, making a rise in gearing more attractive.

Despite this, Mr Tan said he expects rated S-REITs to adopt a more conservative approach, given the lessons learnt during the financial crisis.

Continued growth in rental rates and high occupancy will benefit the rated S-REITs.

At the same time there is ample liquidity in the market and support from sponsors.

As a result, Mr Tan said Moody’s maintains its stable outlook on the S-REIT sector.

Moody’s revised the outlook on the sector to stable from negative in June 2010 due to the strong rebound in Singapore’s economy.

The stabilization of rents across the retail, office and industrial property sub-sectors, steady performances, and lower refinancing risk for the rated S-REITs also contributed to the revision.

With the availability of new properties and the expected slowdown of Singapore’s GDP growth to around 4.5 percent in 2011, rental rates will grow more gradually across the office, retail and industrial sectors.

Source : Channel NewsAsia – 25 Jan 2011