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Property firms become net sellers in Singapore in Q3 as they turn overseas

Wednesday, October 15, 2014 - 12:45

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Reits were the largest buyers of properties in Q3, and were active across all of the commercial, industrial and hospitality sectors - PHOTO: SPH

ACQUISITIONS by real estate investment trusts (Reits) pushed up real estate investment while property companies became net sellers in the third quarter, according to a DTZ report released on Wednesday.

Q3 real estate investment activity rose about 15.4 per cent quarter-to-quarter to S$5.5 billion, bringing the total nine-month investment volume to S$15.3 billion.

Reits were the largest buyers of properties in Q3, and were active across all of the commercial, industrial and hospitality sectors. They acquired a total of S$2.9 billion worth of properties, accounting for more than half the activity in the quarter.

Hospitality deals included the acquisitions of InterContinental Singapore (S$497.1 million) and Fraser Suites Singapore (S$327 million) by Frasers Hospitality Trust, while Far East Hospitality Trust took a 30 per cent stake in a joint venture with Far East Organization to develop Outpost Hotel Sentosa and Village Hotel Sentosa.

Office and industrial Reits also made acquisitions, with Keppel Reit buying a one-third stake in Marina Bay Financial Centre (MBFC) Tower 3 for S$1.2 billion in what is this year's largest real estate investment deal so far, while Ascendas Reit acquired Aperia for S$458 million, and Viva Industrial Trust bought Jackson Square and Jackson Design Hub for S$111.5 million.

With no disposals in the quarter, Reits were naturally net buyers of properties in Q3.

In contrast, property companies (listed and non-listed) were net sellers. They divested about S$2.9 billion of properties in the quarter, which outnumbered their S$2 billion in acquisitions. (Even this acquisition figure paled in comparison to the average S$3.1 billion each that they achieved in the first quarter and the second quarter).

A large proportion of these divestments were asset injections into Reits, such as Keppel Land's sale of its MBFC Tower 3 stake to Keppel Reit. Another notable divestment was the sale of Straits Trading Building by The Straits Trading Company.

Lee Lay Keng, DTZ's South-east Asia regional head of research, attributed the lower amount of acquisitions by property companies to their increased activity overseas. "As at end-Q3 2014, Singapore-based property companies are estimated to have made close to US$4.1 billion of acquisitions overseas. With the overall residential market in Singapore remaining slow and a limited stock of assets available for sale at the right price, Singapore-based property companies are expected to continue to make strategic investments overseas."

In determining what is an investment sale, DTZ only included transactions that are at least S$5 million. It also excluded S$439.5 million of transactions in single residential units and lots that cannot be redeveloped or sub-divided into more than one plot.

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