Office S-REITs Sees Healthy Fiscal Results

Office S-REITs Sees Healthy Fiscal Results In 2021

SINGAPORE – Real estate investment trusts (REITS) listed here with office and retail properties recorded decent results for financial year 2021, according to a commentary published on The Business Times on Thursday morning (10 February, SGT).

For example, Suntec REIT, which has office and retail assets in Singapore, Australia, and the UK, saw its distribution per unit (DPU) for the whole of 2021 increase by 17.1 percent.

As that for CapitaLand China Trust (CLCT), which owns four logistics properties, five business parks, and 11 shopping centres in China, DPU jumped by 37.5 percent.

However, the article writer Leslie Yee noted that both CLCT and Suntec REIT are trading at significant discounts compared to their net asset values (NAV) as of 31 December 2021, at 24 and 26 percent respectively based on unit prices at the close of market on Wednesday (9 February).

He said that Singapore-listed REITS (S-REITs) trading at large discounts versus their NAV should consider selling their commercial properties at book value or a premium to their book value.

“REITs that want to avoid such a situation should instead consider divesting their portfolios of assets at book value or a premium to book value. Divestment proceeds can be returned to unitholders and the said trusts wound up.”

“There appears to be ample liquidity from various pools of buyers of physical real estate to support the execution of such a strategy,” explained Yee.

For instance, Suntec REIT unloaded strata office units at Suntec Tower One and Suntec Tower Two within Singapore’s Central Business District (CBD) last year for S$197 million (S$2,510 psf). And the selling price was 8.9 percent higher than the independent valuation.

In January 2022, Frasers Logistics and Commercial Trust disclosed that it had struck a deal to dispose a mixed-use commercial project in the CBD, Cross Street Exchange, for S$810.8 million. This marks a 28.3 percent premium to book value as of end-September 2021.

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