REIT ASIAPAC
INTERVIEW
SINGAPORE:
Interview
NOEL NEO ,
CEO, K Hotel Advisors
01
REITs in Singapore saw huge price declines in March 2020
because there was a significant investor base investing in REITs
as carry trades. A carry trade is a strategy by which an investor
borrows from financial institutions at approximately 3% or less
to invest in REITs yielding 5% or more. The collapse in REIT prices
triggered margin calls and forced selling, which exacerbated the
volatility.
Australia’s high-end department store, Chatswood Westfield, was closed
during Covid-19 pandemic lockdown.
AUSTRALIA:
ELITE REIT’S COVID -19 IMPACT
MITIGATED BY ADVANCE RENT;
MANAGER REMAINS POSITIVE
As REITs globally brace for further fallout caused by the Covid-19 pandemic,
Elite Commercial REIT remains optimistic that it could weather the downturn.
Hospitality and retail REITs were particularly hit hard, with
some hotel REITs down over 50% from end-January levels. Some
of these REITs are trading at half the value of their underlying
properties. Industrial, medical, office REITs were less impacted,
with price declines in line with market or less.
PETER MORRISSEY ,
CEO – Real Estate Securities of Sydney-based
APN Property Group
01
Singapore recently saw a sharp increase in the
number of infected cases. What have been the
impacts on the general market, in particular, the
hotel sector?
Australian REITs have been hit particularly hard,
compared to their counterparts elsewhere in Asia.
Why?
Australian REIT’s high offshore ownership was likely a contributor
to their aggressive sell-down exacerbated by the weak Australian
dollar. The Australian REIT market’s significantly higher exposure
to retail real estate compared to other global REIT markets was
also a contributor as the retail sector is seen as highly exposed
to Covid-19. At the height of the panic selling, there was no
recognition of retail real estate sub-categories based around
non-discretionary spending such as supermarkets, chemists, and
essential services, including medical, which make up a significant
contribution to landlord cash flows.
02
What is the outlook for
Australian REITs?
SINGAPORE - April 11, 2020: Empty Street of Singapore CBD, during Circuit
Breaker or Lockdown due to increased rate of Covid-19 Infection
Because of the sell-off, the Australian REIT market looks good
value compared to many offshore peers. It has recovered
significantly from its lows buoyed by over A$200 billion (US$127
million) in stimulus from the Australian government to assist with
the economic recovery. Sectors such as childcare have bounced
on targeted government stimulus. Others, including the large
mall owners which were aggressively sold down, found investor
support after the release of the Leasing Code of Conduct, which
was established to assist tenants and landlords in recovering
from the crisis.
02
What is your view
going forward?
The major uncertainty is for how long the lockdown on cross-
border travels and even internal travels will last, and if we will
go through repeated bouts of lockdowns. That said, REITs in
Singapore are trading at prices already reflecting the lockdown,
and there is hardly a worse case scenario for these REITs than
zero occupancy and footfalls.
8
Elite Commercial REIT management team
The shares have fallen to £0.60 at the time of writing, compared
with its IPO price of £0.68. The REIT, which had its debut on
February 6, has an appraised value of £319 million[1], with a
portfolio comprising 97 properties across the UK. Of these, 96
are freehold properties, and one is on a long leasehold tenure
expiring on May 19, 2255. Almost all of its gross rental income
is derived from leases with the UK’s Department for Work and
Pensions (DWP), the country’s largest public service department.
REITAsiaPac spoke with the REIT Manager’s Chief Executive
Officer Shaldine Wang, Chief Investment Officer Jonathan
Edmunds, Chief Financial Officer Joel Cheah, and Senior Manager
of Investor Relations Leng Tong Yan.
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