Bookmark & Share
Singapore real estate investment trusts (S-REITs) are expected to continue their overseas acquisitions this year as they pursue yield accretion, portfolio diversification and asset growth, according to Moody’s.
In its report, ‘Industrial Real Estate Investment Trusts — Singapore: Industrial REITs Will Be Acquisitive in 2016’, Moody’s underscored that domestic yields have fallen over the last few years and it does not expect the trend to reverse in 2016-2017.
CBRE data showed that rental yields for warehouses in Singapore dropped to 2.5 percent in Q3 2015 from 3.2 percent in early-2010, while S-REITS’ recent overseas acquisitions posted net property income yields of between five percent and 10 percent.
Aside from higher yields, overseas acquisitions also helped the REITs grow their portfolio size, enhance their income diversification and expand their geographical reach.
Notably, three of four rated industrial S-REITS – Ascendas Real Estate Investment Trust (A-REIT), Cache Logistics Trust and Mapletree Logistics Trust – unveiled material overseas acquisition during the last 12 months.
Assuming its 27th asset acquisition in Australia completes successfully, A-REIT will see its asset concentration in Singapore fall to around 86 percent from 95 percent.
“Similarly, Cache’s Singapore assets will account for 88 percent of its total portfolio from 98.5 percent prior to the purchase of its six Australian properties,” said Moody’s. With this, the
With this, the ratings agency expects the industrial S-REITS to continue to gravitate towards Australia in their acquisitions, considering the stable and well-regulated real estate market of the said country. In 2016, industrial supply in Australia is expected to be underpinned by continued demand for logistic and distribution center space.
Moody’s also expects the REITS to continue to exercise discipline in funding their acquisitions with a prudent mix of equity and debt to maintain their credit profiles.
Nikki De Guzman, Editor at CommercialGuru wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg