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Singapore realty trusts rebound, attract investors afresh

China Daily | Updated: 2016-10-31 14:04

Singapore realty trusts rebound, attract investors afresh

Two tourists review on their digital camera a photograph of Singapore's commercial skyscrapers. The city-state's industrial buildings and business parks have been seeing high demand for office space this year. [Photo/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 from 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 US 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 US, Japan and Europe. This year, the Singapore REIT Index has beaten all those peers.

"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 biomedical 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.

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.

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