REITS eye asset enhancement to boost growth

 July 2, 2012 ⋅

With persistently high property prices in Singapore, Singapore real estate investment trust (REITS) are focusing mainly on asset enhancements to boost their growth.

Any acquisitions that they are looking at will have to be yield accretive.

When Causeway Point completes its refurbishment works by this December, its occupancy rate is expected to improve to 100 per cent.

The heartland mall in Woodlands is part of Frasers Centrepoint Trust’s (FCT) portfolio of assets, which also include four other malls in the suburbs.

FCT said it is focusing on asset enhancement to drive growth.

Chew Tuan Chiong, CEO of Frasers Centrepoint Asset Management, said: “Investors should not expect a big quantum when REITS are buying assets. If you are lucky, it will be accretive. Therefore enhancement will be the most powerful engine for growth. We had a pretty good first half. The momentum is there. Barring unforeseen circumstances, the economy continues to hold up, despite the volatility. I think most REITS, including ourselves, are expecting a good year ahead.”

With high liquidity in the market, industry players said REITS are a good hedge against inflation. But on the other hand, other industry players said this could make it hard to acquire assets, particularly office properties, as investors look to strata titled assets, leading to higher asking prices of Grade A office properties.

CapitaCommercial Trust (CCT) said higher property prices and lower office rents pose challenges for new acquisitions.

“There are very few good quality assets to buy. If you find something that is a strategic fit in your portfolio, it is also very important to understand the location, tenancy profile and whether if there is going to be an upside potential in the rent reversions,” said Lynette Leong, CEO of CapitaCommercial Trust.

CCT is confident of the prospects of its latest office development CapitaGreen located at the site of Market Street Car Park.

When completed, the tower will inject 700,000 square feet of Grade A office space.

Being the only development to be completed in 2014 in the central business district, CCT is confident that CapitaGreen will be able to attract premium tenants.

Source : Channel NewsAsia – 2 Jul 2012