S-REITs Embark On Property Purchase Spree After Losing US$340b
SINGAPORE – Singapore real estate investment trusts (S-REITs) are resuming their acquisition of properties across the world, particularly office assets, after being hit hard by the COVID-19 pandemic, reported BloombergQuint on Monday morning (2 November).
For instance, Suntec REIT completed the purchase of a 50 percent stake in 2 Grade A office buildings known as Nova Properties in West End, London for £430.6 million (S$760 million). The trust closed its maiden transaction in the city that had been stalled as a consequence of the virus outbreak.
In September, Keppel REIT announced that it is buying Pinnacle Office Park – a freehold project in Sydney comprising 3 Premium Grade office buildings – for A$306 million (S$305 million).
During the same month, Ascendas REIT revealed that it is picking up an upcoming suburban office building called MQX4 in Macquarie Park, Sydney for A$167.2 million (S$161.0 million).
For REITs listed in Singapore, which has the most trusts in Asia excluding Japan, property acquisitions are slowly picking up thanks partly to more favourable financing costs.
In fact, the lion’s share of the S$3 billion worth of property acquisitions announced since January 2020 occurred in Q3, stated DBS Group Holdings in a note released on 29 September.
The financial institution believes that real estate markets will continue improving for the rest of 2020 and the beginning of 2021, with DBS analyst Derek Tan forecasting more property purchases as the COVID-19 crisis is surmounted over time.
“Pandemic-related distress sales mean some good opportunities for Asian money accessing the overseas market,” said Patrick Wong, a senior analyst with Bloomberg Intelligence, who added that more deals are expected to materialise.
However, the virus outbreak has dealt a heavy blow to S-REITs, which had collectively lost over US$340 billion (S$464 billion) in their market value this year based on an index tracking them globally as demand for office space weakened as most staff worked from home and clients turned to online shopping instead of brick-and-mortar shops.