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

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.