Singapore REIT Industry
A Sombre Year for S-REITS
In 2008, one new REIT was listed,
bringing the number of listed Singapore
real estate investment trusts (S-REITs)
to 21. The total market capitalisation
of S-REITs shrank by 53.7% to about
$12.9 billion from $27.7 billion in the
previous year, as the fourth quarter
capped off a sombre year for global
equity markets and the S-REIT sector.
In a comparison of annual total returns
of Asian REITs, losses in the REIT
market ranged from 14.8% in Malaysia
to 56.1% in Singapore in 2008.
The Singapore stock market ended the
year down 49.2% while the S-REIT index
fell 59.0% on concerns of refinancing
risks and softening rentals. Investors
were also wary of REITs that might
embark on capital raisings. Due to
higher perceived risks, REITs with
foreign-based assets and limited
sponsorship bore the brunt of the sell-off.
With the broad market sell-off
and sector re-rating, the average
distribution yield of S-REITs increased
to 12.0% as at end-2008 from 4.3% as
at end-2007. This was 9.9 percentage
points above the 10-year government
bond yield of about 2.1%, compared
attractively with the average yield gap
of 2.6 percentage points since January
2003 and a yield gap of 4.4 percentage
points during the previous downturn in
first half of 2003.
S-REITs are also trading at vast
discounts to their net asset value (NAV).
The weighted average discount to NAV is
steepest for office REITs at 68.3% versus
53.0% for hospitality REITs, 45.0% for
retail REITs and 37.9% for industrial REITs
as at 31 December 2008.
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