Singapore’s REITs, and in particular their juicy yields of sometimes more than 7 percent, had gained in popularity as interest rates fell, but with the U.S. Federal Reserve beginning to taper its asset purchases and global interest rates headed higher, that popularity is getting a bit thin.
“It’s a theme which has lasted for quite a period of time,” Gibson noted. “People want yields as a starting point, but they also want growth,” he said. “For Singapore, the growth is relative anemic. There’s not a huge amount of upside.”
Ong also noted that interest in REITs has been waning, with the segment’s average daily volume falling from around $80 million (USD) to around $35 million to $40 million daily in December. “The interest is all gone,” he said. He expects this will affect the performance of the new listing.
While Ong noted the OUE Commercial Trust managed to land several cornerstone investors, there were no big institutional funds among their ranks, which were mostly made up of Chinese individuals.
Henderson’s Gibson said he’s giving the listing a pass. “We can get a higher return from other markets,” he said.
The trust’s growth prospects appear somewhat limited; while its sponsor has three more office assets it could offer to the REIT, rising interest rates may make the acquisitions unpalatable.
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