S-REITS dominated cross-border acquisitions within Asia in 2011

Singapore REITs (S-REITS) continued to dominate cross-border acquisitions within Asia in 2011, according to a report by CBRE.

The real estate consultancy said S-REITS invested S$2.51 billion abroad in 2011 with the vast majority of capital targeted at China.

This was comparable to the investments made the previous year, when S-REITS pumped S$2.49 billion into projects abroad.

CBRE said 17 out of 26 S-REITs are currently active overseas for a variety of reasons including diversification of risk, lack of domestic assets, exposure to a wider range of markets and better yields.

However, CBRE notes that the largest S-REITs remain focused on the domestic market and currently hold numerous prime assets in Singapore.

While the quality of these assets has attracted overseas investors to acquire shares in such S-REITs, CBRE said it has become more unattractive for domestically focused S-REITs to acquire additional assets in Singapore.

It added that investors have already raised concerns about the low yield levels of some recent S-REIT acquisitions, such as CapitaCommercial Trust’s acquisition of Twenty Anson at an initial yield of 2.6 per cent.

CBRE said acquiring further assets in Singapore would potentially dilute distribution yields.

Therefore, S-REITs must continue to look abroad in search of income producing and yield-enhancing assets.

As of the fourth quarter of 2011, CBRE’s analysis of identifiable institutional and major shareholders of S-REITS shows that just a third of shares were owned by domestic investors, while North American investors accounted for 46 per cent of the total.

Based on the S-REITs’ portfolios at their latest available market values, CBRE said around 38 per cent of their assets are located outside Singapore, one of the highest such proportions among global REIT markets.

Two S-REITs have started to invest abroad recently as they shift the emphasis of their growth strategy to diversification.

Since January 2010, K-REIT has acquired three commercial properties in Australia, while Ascendas REIT completed its first overseas acquisition in October 2011 with the purchase of a business park in Beijing.

Source : Channel NewsAsia – 29 Feb 2012

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