Mar 01, 2012 | Comments 0
Singapore REITs continued to dominate cross-border acquisitions within Asia with 17 out of 26 REITs currently active overseas, according to CBRE.
Last year, S$2.51 billion were invested by S-REITs abroad when the vast majority of capital targeted China followed by South East Asia, Pacific, Japan and India.
Seven S-REITs were invested solely in foreign markets while nine focused exclusively on the domestic market.
“Despite Asian REITs’ sustained interest in expanding their portfolios, many markets only permit investment in the domestic market or require approval for overseas acquisitions. These regulations continue to limit cross-border investment activity, Singapore being one of the few exceptions to this rule,” said Danny Mohr, executive director, International Valuation, Asia at CBRE.
The largest S-REITs remain focused on the domestic market and currently hold numerous prime assets in Singapore.
Despite attracting overseas investors to acquire shares in such S-REITs, CBRE said it has become unattractive for domestically focused S-REITs to acquire additional assets in Singapore as it would potentially dilute distribution yields.
It also said investors have already raised concerns about the low yield levels of some recent S-REIT acquisitions.
Citing CapitaCommercial Trust’s acquisition of Twenty Anson, CBRE said it was acquired at an initial yield of 2.6 per cent.
S-REITs expansion overseas in recent years will therefore help in diversification of risk, exposure to a wider range of markets and attract better yields.
Other drivers include the strong currency advantage and significant support from sponsors, particularly those with an overseas presence, which makes it easier for REITs to identify potential acquisitions in overseas markets.