China-focused S-Reits remain listless despite reopening plans

MARKET watchers had pointed to China’s strict zero-Covid stance as a key dampener on the Singapore-listed real estate investment trusts (S-Reits) with exposure to the world’s second largest economy.

But S-Reit investors anticipating the overhang to be lifted along with the Covid-19 curbs are likely to be disappointed. Market reaction to China’s reopening plans has, so far, been surprisingly muted.

Since Beijing announced the nationwide loosening of Covid restrictions on Dec 7, 2022, the price performance of the five China pure-play S-Reits — CapitaLand China Trust (CLCT), Sasseur Reit , Dasin Retail Trust , BHG Retail Reit and EC World Reit (ECW) — has not been inspiring.

Of these China-focused real estate investment trusts (Reits), only one — Dasin Retail Trust — is trading higher since the initial announcement on China’s reopening.

Units of Dasin Retail Trust, whose portfolio comprises seven retail malls in China, have jumped 14 per cent or S$0.035 since Dec 6 to close at S$0.285 on Dec 30.

This comes as some relief to the property trust, which was trading at an 80 per cent discount to net asset value (NAV) earlier in the month.

Units of fellow retail mall landlord Sasseur Reit, however, retreated 3.8 per cent or S$0.03 to S$0.755 despite the positive news.

Even CLCT, the largest China-focused S-Reit with 11 retail assets, five business parks and four logistics parks in its portfolio, failed to generate any excitement among investors. Its units fell 2.6 per cent or S$0.03 to S$1.12.

Prices of the other two pure-play China S-Reits — BHG Retail Reit and ECW — were unchanged.

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Meanwhile, the performance of four other S-Reits with exposure to China — Mapletree Logistics Trust (MLT), CapitaLand Ascott Trust (Clas), Mapletree Pan Asia Commercial Trust (MPACT) and OUE Commercial Reit (OUE C-Reit) — has also been mixed.

Clas, whose S$7.6 billion portfolio comprises 95 lodging assets in 15 countries as at end June 2022 — including five properties in China – gained 7.1 per cent or S$0.07 to close at S$1.05.

With serviced residences, hotels, rental housing and student accommodation assets under its belt, the hospitality Reit is seen as one of the potential key beneficiaries of the reopening theme.

However, MPACT, MLT and OUE C-Reit saw their unit prices fall between 1.8 and 6.9 per cent.

MPACT’s portfolio includes two office buildings in China — Gateway Plaza in Beijing and Sandhill Plaza in Shanghai — which make up 11 per cent of its assets under management (AUM).

Yet, since the Dec 7 announcement, MPACT has lost 1.8 per cent or S$0.03 to S$1.67.

Meanwhile, China accounted for 21.1 per cent of MLT’s portfolio of S$12.9 billion worth of AUM as at Sep 30, and contributed to 22.6 per cent of the industrial S-Reit’s S$371.5 million in gross revenue for the first half, ended September 2022, of fiscal 2023.

Units in MLT are down 2.5 per cent or S$0.04 to S$1.59.

OUE C-Reit, which has exposure to China through its Lippo Plaza office building in Shanghai, is down 6.9 per cent or S$0.025 to S$0.335.

As at end September, Lippo Plaza accounted for 9.5 per cent of OUE C-Reit’s asset value and revenue contribution.