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Asian property investment trusts suffer
record fall in second half 2008
The Asian REIT (Real Estate Investment Trust) markets
suffered their deepest ever fall in the second half of 2008 as the global
financial tsunami intensified and the availability of credit was further
squeezed following the September collapse of Lehman Brothers, according to CB
Richard Ellis’ 2H 2008 REITS Around Asia publication.
Although the onset of a major downward cycle in Asian property markets was
observed towards the end of the year, the impact of the weakened market
fundamentals on REITs has been less serious as compared to basic investor
concerns over whether Asian REITs generally can continue to obtain sufficient
financing to ensure their survival during this tumultuous period.
The market capitalisation of Asian REITs shrank by almost a third over the last
six months of 2008 to around US$48 billion as prices took a deep dive and new
listings dried up. Nearly all REITs around the region recorded a fall in value
with just two recording a marginal uptick. Many plunged by over 30% during the
review period.
The correction in Singapore was among the most severe with S-REIT’s posting an
average loss of 54% between July and December 2008. Nevertheless, with the
exception of Singapore, Asian REIT markets still managed to outperform the
broader stock markets. The full year saw seven new REIT listings with only one
debut, Thailand’s Centara Hotels & Resorts Leasehold Property Fund, taking place
in the second half and bringing the total number of REITs in Asia to 115 as of
the end of 2008.
Lack of available credit was the single most important issue confronting Asian
REITs with some unable to obtain sufficient funds to meet their short-term debt
obligations and others narrowly failing to finalise deals transacted before the
onset of the market correction.
The second half saw the credit crunch claim its first Asian REIT victim, Japan’s
New City Residence (NCR), which filed for bankruptcy protection on 9 October
after failing to overcome refinancing difficulties. NCR’s collapse severely
battered confidence in the J-REIT investment market and heightened investors’
concerns that more bankruptcies would soon follow, especially among small and
midcap trusts. The TSE J-REIT Index plunged 12% on the date NCR filed for
bankruptcy, its largest ever single-day fall.
In Japan, the second half saw Nippon Residential Investment successfully dispose
of a Tokyo residential building but cancel its planned acquisition of Pacific
Royal Court Minato Mirai Urban Tower in Yokohama. In Korea, the Macquarie
Central Office CR-REIT extended its maturity date to 2010 after it was unable to
dispose of its Kukdong Building following the withdrawal of potential buyers
from the acquisition of the asset. Meanwhile, Singapore-based Asian Public Real
Estate Association is asking for government assistance to help refinance debt
for S-REIT’s. Elsewhere, the pressure to meet short-term re-financing
obligations appeared less urgent.
In Hong Kong, REITs were not active in making acquisitions and were therefore
not subject to any deadlines for bringing new capital to complete transactions.
While REITs were finding it difficult to obtain financing, many found themselves
utilised as financing tools by shareholders keen to offload stakes to improve
their balance sheets or repay loans.
In August, debt-laden Allco Finance Group, which has suspended trading in
Australia, sold its 17.7% stake in Singapore listed Allco Commercial REIT and a
100% stake in the REIT’s manager to Frasers Centrepoint Ltd for S$180 million
(US$125 million) to repay debt. In November, Malaysian developer YTL acquired a
26% stake in Singapore-listed Macquarie Prime REIT (later renamed Starhill
Global REIT) and a 50% stake in the REIT’s manager from Macquarie Bank for a
total consideration of S$285 million (US$198 million). September saw J-REIT
Replus Residential Investment (REP) sell a 90% stake in its asset management
firm Re-plus REIT Management to US investment fund Oaktree Group after its
sponsor Re-plus Inc. filed for bankruptcy protection.
The second half saw securities policy setters in China and the Philippines
reveal plans to launch REIT markets as they looked to support property
developers suffering from the credit crunch and slow property sales. Following
Premier Wen Jiabao’s 4 December comments about the need to widen financing
channels in the private sector, the People’s Bank of China announced it was
studying the launch of REITs in China. Meanwhile, the Philippines REITs bill
reached a second reading in the Senate.
Other notable developments during the review period included the South Korean
Ministry of Land, Transport and Maritime Affairs unveiling of a number of
measures designed to encourage asset management companies to purchase unsold
apartment units from financially distressed developers and re-package the assets
into Corporate Restructuring (CR) REITs. However, launching new REITs has been
extremely challenging amid the weak investment sentiment, as evidenced by the
record low number of REIT IPO’s in the second half. Therefore, raising funds for
property developers via REITs is unlikely to be viable solution in the
short-term.
The downward cycle in the Asian property markets is set to last for the
remainder of 2009 and it remains difficult to predict whether a recovery will
begin in 2010. Rental incomes and the asset valuations of REITs will therefore
be significantly affected. However, the correction in REIT pricing, which began
in mid- to late- 2007, occurred roughly 6-12 months ahead of the current
downward cycle.
The second half of 2008 was a trying period for the Thai stock market and
property funds. Pressured by both the global financial crisis and the worsening
domestic political situation, the SET Index lost nearly half of its value in
2008. As capital market liquidity dried up there was only one new property fund
listed during the second half of the year, bringing the total to 21. Total
market capitalisation fell 18.5% during the same period as prices revised
downwards.
The formation of the new Democrat-led government gave market sentiment a small
boost at the end of the year but whether it can make any lasting impact on
investor confidence remains to be seen in the New Year.
Listed property funds in Thailand have performed variably during the second half
with eight funds hanging within the -1% to 2% band and six others declining over
20% during the same period. The dividend yield for Thai listed property funds
thus ended with a wider range of 0.4-17.8%, mainly down to the general
performance of their underlying assets.
The only newly-listed fund in the second half was the Centara Hotel & Resort
Leasehold Property Fund, which has invested in a 30-year leasehold in the
Centara Grand Beach Resort located on Chaweng Beach in Samui. The hotel is
managed by Central Plaza Hotel, a SET-listed company. The fund size is
approximately THB 3.2 billion (US$92 million) and will be managed by Kasikorn
Asset Management, with guaranteed dividend returns for the first four years.
Ticon Property Fund raised its fund size for the third time since inception for
the purpose of placing 38 factories and 8 warehouses into its portfolio.
“Some observers expect an increase in property fund listings in 2009 as
developers search for alternate sources of capital. A key feature that
differentiates Thai public listed property funds from other REITS in Asia is
that Thai REITS have virtually no gearing,” states Nabeel Hussain, Manager of
CBRE Research in Thailand.
Looking ahead, Asian REITs holding income-generating properties in prime
locations appear to be better placed as many have secured tenancy for the year.
REITS are expected to focus on cost savings and income protection by retaining
tenants in 2009.
Asian REIT acquisition activities are likely to be limited in the coming months
as the credit availability issue remains unresolved. However, the market may see
more M&A activity involving REITs as some REIT holders cash in their positions
to repay debt while property investors take advantage of the current market
conditions to hunt for bargain acquisitions. – (Source CBRE Thailand)
The world’s top property hotspots for 2009
International real estate investment specialists Property Frontiers have named
their top six property investment hotspots for 2009 – and the list contains some
surprises.
Panama, the Central American republic tops the list due to a strong economy, a
favourable tax regime and offshore banking attracting businesses from across the
globe. Investors can choose a variety of different options, from hotels enjoying
high occupancy rates, to offices, and beachside resorts. The expansion of the
Panama Canal looks set to underpin future economic growth.
The Malaysian capital Kuala Lumpur is a thriving city with affordable property
and has cheap links to Europe with a new budget airline offering direct flights
to London from just £99. Outside of Kuala Lumpur is the teeming tourist
playground of Sabah on North Borneo,
Brazil is a booming economy and with sun, samba and a cheap cost of living, it
is taking over from Florida as the fun capital of the world. Tourism is lifting
off around the northeast city of Natal, which boasts average daily temperatures
of 28°C all-year-round and mile after mile of sandy, palm fringed beaches. If
traditional buy-to-let is the target, Sao Paulo is one of the world’s largest
and fastest growing cities with an insatiable demand for quality accommodation.
Slovakia’s High Tatras national park offers all-year round tourism as a UNESCO
area of outstanding natural beauty. In the summer, the mountains are an
attraction for walkers and golfers, while in the winter cheap skiing lures
visitors from all over Europe.
The USA is tipped as one to watch as prices bottom out. Apartments in Florida
are selling at 54% lower than their launch price, and according to the builders,
at less than their build cost and offer an instant 6% rental return.
Coming in last is the UK, with property bargains piling up at auction houses and
market commentators still forecasting that prices are stagnating or still
falling in most areas.
“In real terms the pound is at a point not seen for 10 years,” said Property
Frontiers sourcing manager Ben Jefferis. “This offers a fantastic buying
opportunity for international investors. As a company we have never seen so many
enquiries from our international investors looking for UK property. A combined
depreciation of the pound and the market now makes UK property some 54% cheaper
than a year ago. – (Source Property Frontiers)
Raimon Land appoints new CEO, announces bonus issue to shareholders
Property development company Raimon Land PLC have announced the resignation of
its Executive Director and CEO Nigel Cornick effective 1st March, 2009. Cornick
has also resigned from the Board of Directors of Raimon Land and its associated
companies.
Raimon Land simultaneously announced the appointment of Hubert Viriot, one of
its current Directors, as Chief Executive Officer. Viriot is also an executive
at IFA Hotels & Resorts, a major shareholder of Raimon Land.
The shareholders are committed to the ongoing success of Raimon Land, and plans
are to inject further capital to assist in the current and future operational
requirements of the company.
Chairman of the Board of Directors at Raimon Land, Sompoch Intranukul, said: “I
would like to thank Mr. Cornick, on behalf of our Board of Directors, for his
contributions in building Raimon Land into the premier real estate developer in
Thailand, and congratulate Mr. Viriot on his appointment as the new CEO. We look
forward to continuing the execution of the Company’s strategy moving forward.”
The Directors have also announced a stock (bonus issue) and cash dividend equal
to Baht 278.98 million to its shareholders.
Under the proposal, each Raimon shareholder will receive 0.0837 new shares and
Baht 0.0093 in cash for each share held at the record date. The cash component
of the dividend will be used to cover withholding tax payable by the
shareholders on the bonus issue.
Shareholders on the company’s register on the record date, proposed to be 17th
March, 2009, will be eligible for the bonus issue shares and dividend.
The board also approved that the auditor undertakes the offset of the share
discount with retained earnings totalling Baht 208.58 million.
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