Singapore to lead Asia Reit recovery on bank funding

Source : Business Times - 6 Apr 2009

Real estate investment trusts in Singapore and Australia will be the first in Asia-Pacific to recover from the economic slowdown on their ability to secure funding from banks, according to a new survey.

Singapore has the region’s best environment for Reits in terms of property market growth and regulatory support, while South Korea, Vietnam and Indonesia have the worst conditions, Sydney-based Trust Company Ltd said in the annual Reit survey it published last Friday.

‘In Singapore, every Reit has so far been able to successfully refinance debt as it’s fallen due,’ Trust chief executive officer John Atkin said in an interview here. ‘They’ve been forced to take a conservative approach by the Monetary Authority of Singapore, and have been more careful with their gearing levels.’

Asia-Pacific syndicated loans excluding Japan plunged 65 per cent to US$26.9 billion in the first quarter as banks reined in lending amid the global credit crisis, according to data compiled by Bloomberg. When Singapore Telecommunications Ltd agreed to a $1.08 billion three-year loan last month to refinance maturing debt, it paid more than 10 times the interest of similar-maturity loans it signed three years ago, the data showed.

Singaporean property trusts and developers need to refinance as much as US$13 billion of debt maturing this year, the city’s The Business Times newspaper reported on April 1, citing Asian Public Real Estate Association head Peter Mitchell.

‘It’s a credit crunch, not a property crunch and by that I mean the fundamentals of the real estate market are quite good,’ UBS AG senior property analyst John Freedman said in a phone interview from Sydney. ‘The question mark is over the financing of it, and clearly more transparent markets will have a stronger chance of recovery.’ Reits across Asia-Pacific declined in the past 18 months as rents fell and the mortgage-backed securities market they use for funding dried up.

The Tokyo Stock Exchange Reit Index has plunged 68 per cent from a high of 2612.98 in May 2007, while Bloomberg’s Reit Index is down 30 per cent this year.

Australian Reits including Valad Property Group and Goodman Group have written down the value of investments and cut back spending as they repair balance sheets.

Sydney-based Goodman, whose shares slumped from a high of A$7.44 on Feb 13, 2007 to 40 Australian cents, last Friday said that it secured new leases in France at prices which matched past European rental transactions.

Standard & Poor’s yesterday cut the group’s rating to BBB from BBB+, citing the economic downturn’s impact on its biggest tenants and the company’s ‘reduced access to capital’. ‘Our market is off 73 per cent from its March 2007 peak.’