May 9, 2021

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Bulk of S-Reits in key global real estate indices

3 min read
  The FTSE EPRA Nareit Global Real Estate Index Series is a commonly tracked global...
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The FTSE EPRA Nareit Global Real Estate Index Series is a commonly tracked global benchmark, with an approximate US$340 billion in assets under control actively benchmarked or passively monitoring the indices.

FTSE Russell, in collaboration with the European Public Real Estate Association (EPRA) and the National Association of Real Estate Investment Trusts, developed the indexes (Nareit).

A business is eligible if related real estate operations, such as ownership, trading, and production of income-producing real estate, account for at least 75% of its Ebitda. Other factors to consider are the scale and liquidity of the business.

The index sequence will contain 23 SGX-listed real estate related equities by the end of 2020, including 19 S-Reits and land trusts. These 19 trusts have a total market capitalization of more than S$90 billion, accounting for nearly 80% of Singapore’s S-Reits and property trust business. They produced an average total return of 5.3 percent in year-to-date (YTD) 2021 until April 15, reversing a total return decrease of 4.3 percent in 2020.

Ascott Residence Trust will be added to the index sequence in June 2020, and Parkway Life Reit will be added in September 2020. In 2019, five S-Reits (Manulife US Reit, Frasers Centrepoint Trust, Frasers Logistics & Commercial Trust, Keppel DC Reit, and Sasseur Reit) entered the index sequence (Frasers Logistics & Commercial Trust, Sasseur Reit Frasers Centrepoint Trust, Keppel DC Reit, and Manulife US Reit).

The largest hospitality trust listed on the Singapore Exchange, Ascott Residence Trust (ART), has assets worth S$7.2 billion as of December 31, 2020, with properties in 38 cities around the world. ART’s FY2020 gross profit fell 41% to S$149.6 million due to Covid-19 headwinds in the hospitality industry. However, the trust manager pointed out that assets in markets with a higher proportion of long stays, such as China and Vietnam, have outperformed those in markets that depend on seasonal visitors. It also argues that there is a lot of untapped travel demand, and that the domestic, leisure, and free-lance segments will continue to lead the recovery.

ART also extended its acquisition mandate to include student housing in order to improve the stability of its portfolio. The trust acknowledged that student accommodation is one of the most robust real estate asset groups and has sustained high occupancy throughout the Covid-19 situation in the US. ART’s first purchase of a student accommodation asset in the US was concluded in February 2021 for US$95 million. The asset, Signature West Midtown, is a freehold property with 525 beds spanning 183 units situated in the heart of Atlanta, Georgia.

The largest healthcare-focused S-Reit, ParkwayLife Reit (PLife Reit), has a diversified portfolio of 54 assets with a net asset valuation of approximately S$2.02 billion as of December 31, 2020. It holds a portfolio of private hospitals in Singapore including Gleneagles Hospital, Mount Elizabeth Hospital and Parkway East Hospital. PLife Reit, which achieved total returns of 21 per cent, was one of the top performing S-Reits in 2020 and proceeded to produce positive returns of 7.1 per cent in 2021 YTD.

PLife Reit’s net property income rose by 4% year over year in FY2020, resulting in a 4.5 percent rise in distribution per unit over the same timeframe.

Meanwhle, Polaris at Woodlands set to launch in 2nd half of 2021 that further fulfil the lack of supply on the market.

Because of its solid financial base, the Reit has been able to maintain consistent payments.

PLife Reit effectively refinanced all of its maturing loans due in 2021 during FY2020, with no more debt refinancing needed until 2022. It predicts that, in the long term, the healthcare sector would be critical, owing to an increasingly aging society and increased demand for higher quality healthcare and global aged care facilities.

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