asia pacific reit markets – overview, characteristics … · 2nd international research...

2nd International Research ConferenceSecurities and Exchange Board of India

Mumbai, India 20 March 2015

Asia Pacific REIT Markets –

Overview, Characteristics and Performance

1An Overview of Asia Pacific REIT Markets

Overview, Characteristics and Performance

Professor Sr Dr. Ting Kien HwaFRISM, FRICS, MPEPS, MMIPPM

Head, Centre for Real Estate ResearchUniversiti Teknologi MARA (UiTM)

Academic MemberAsia Pacific Real Estate Association (APREA)

REITs were introduced in Asia in the early 2000s


� REITs did not exist in Asia prior to 2001.

(But in other form i.e. Listed Property Trusts in Australia,

NZ, Malaysia)

� The main impetus behind the creation of REIT in Asia was the

1997 Asia Financial Crisis.


� Many corporations were saddled with huge debts and

undervalued real estate.

� Regulators viewed REIT as a feasible route to recapitalise

corporate balance sheet and to revitalise the property market.

� Korea: corporate restructuring REITs were launched in 2002 to

take over assets of distressed firms.

� Japan : REITs as an alternative source to raise fund

� Taiwan : for financial institutions to divest non-core properties

� Singapore and Malaysia : REIT as a potential route to recycle

capital through the divestment of non-core real estate e.g.


capital through the divestment of non-core real estate e.g.

Starhill REIT

� Hong Kong : to lighten the balance sheet of GLCs e.g. Link REIT

Japan and China are the largest real estate markets in Asia

US$

6,156b

CountryMarket Size

(US$ bn)

Percentage

of Global

Market

Global Rank

Japan 2,484 10.4 2

China 1,424 6.0 4

South Korea 415 1.7 13

India 271 1.1 16

Singapore 204 0.9 21

44.9%4.9%

3.7%3.6%

3.1% 2.8%1.5%

1.3%

0.7%0.3%

Percentage of Asia Market


Source: Pramerica - “A Bird’s Eye View of Global Real Estate Markets”, APREA

Hong Kong 198 0.8 22

Taiwan 173 0.7 24

Indonesia 155 0.6 28

Thailand 81 0.3 36

Malaysia 73 0.3 39

Philippines 39 0.2 48

Vietnam 17 0.1 52

Total 5,534 23.1

44.9%

25.7%

7.5%

Japan China South Korea India

Singapore Hong Kong Taiwan Indonesia

Thailand Malaysia Philippines Vietnam

Asia’s REIT market is approximately 75x what it was in 2001

80

100

120

140

160

Number of REITs Market Capitalisation (US$ Bn)


Source: APREA Research, Bloomberg (as of 30 June 2013)

0

20

40

60

Socioeconomic Reasons to Introduce REITs

Economic Development Funding Social Welfare


Urban Productivity

Expertise Upgrading

Living Standards

Jobs Creation

Capital Markets Reasons to Introduce REITs

Diversification

Income stability

Inflation protection


Inflation protection

Long-term performance

Risk management

Diversification – can improve risk-adjusted returns

0.0%5.0%

10.0%15.0%20.0%

Volatility (3yr)

0.9Correlation (3yr)

8%

10%

12%

14%

16%

3y

r a

nn

ua

lise

d t

ota

l re

turn

TR/GPR/APREA

REIT

TR/GPR/APREA

Composite2

MSCI Asia

Pacific Equities


1As of 31 October 2014 and in US$2TR/GPR/APREA Composite Index includes REITs, landlords and developers that meet

the inclusion criteria

Source: GPR, APREA Research, Bloomberg

0.0%

2.5%

5.0%

Composite REIT

Yields

0.7

0.8

0%

2%

4%

6%

0% 5% 10% 15% 20%

3y

r a

nn

ua

lise

d t

ota

l re

turn

3yr volatility

JPM Govt

Bonds - APAC

Income Stability – to fund retirement cash flow

0%

10%

20%

30%

40%

50%Asia Pacific REITs

Income Return Price Movement

Average annual

income return:

6.2%


-60%

-50%

-40%

-30%

-20%

-10%

0%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD

Oct

'14Source: GPR, APREA Research (as of 31 October 2014)

Inflation Protection – maintains the value of retirement nest eggs

8.00%

10.00%

12.00%

Asia Pacific REITs dividend yield vs. inflation

TR/GPR/APREA REIT Yield Asia CPI YoY


0.00%

2.00%

4.00%

6.00%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013


Long Term Performance – compares favourably to other asset classes

0

100

200

300

400

500

600


1As of 31 Oct 2014 and in US$2Annualised


TR/GPR/APREA REIT TR/GPR/APREA Composite MSCI Asia Pacific Equities

% Total Returns (USD) Oct-14 YTD 1yr 3yrs2 5yrs2 10yrs2

TR/GPR/APREA REIT 3.62 3.59 -0.78 13.08 8.95 9.42

TR/GPR/APREA Composite 3.42 13.91 7.16 14.09 13.57 8.06

MSCI Asia Pacific Equities 1.15 2.86 2.42 8.20 6.91 7.17

Listed Property with stocks and bond – optimises the portfolio

6.0%

6.5%

7.0%

Re

turn

(p

.a.) 25% Global

Listed Property

40% Global

Listed Property


5.0%

5.5%

6.0%

10.0% 10.5% 11.0% 11.5%

Re

turn

(p

.a.)

Volatility (p.a.)

0% Global Listed

Property

Source: Atchison Consultants, S&P/Citigroup (2014)

REIT regimes across Asia Pacific

CountryManagement

Structure

Geographic

Restrictions

Property

Development

Gearing

Restrictions

Dividend

Payout

AustraliaInternal /

ExternalNone Yes None 100%

Japan External None Restricted None ≥ 90%

Singapore External None < 10%< 35% of

asset value≥ 90%

Hong KongInternal /

None < 10%< 45% of

≥ 90%


Hong KongInternal /

ExternalNone < 10%

< 45% of

asset value≥ 90%

Malaysia External None No< 50% of

asset value≥ 90%

TaiwanInternal /

ExternalNone No

< 50% of

asset value100%

Thailand External None < 10%< 60% of

asset value≥ 90%

S. KoreaInternal /

ExternalNone < 30% None ≥ 90%

India External None < 20%< 50% of

asset value≥ 90%

Typical REIT Structure in Asia (external management)


Types of REITs

Office Retail Industrial


Hospitality

Tele-communication

towers

Healthcare

Oil palm plantations

Residential

Railroad

Asia’s REIT market has grown rapidly

100

120

140

160

180

200

Number of REITs Market Capitalisation (US$ Bn)


Source: APREA Research, Bloomberg (as of 30 November 2014)

0

20

40

60

80

100

And also in relative importance

60%

80%

100%

Proportion of Global REIT Market Capitalisation

Asia Oceania Europe North America Other



0%

20%

40%

Dec

2001

Dec

2002

Dec

2003

Dec

2004

Dec

2005

Dec

2006

Dec

2007

Dec

2008

Dec

2009

Dec

2010

Dec

2011

Dec

2012

Dec

2013

Nov

2014

Growth has been concentrated in Japan, Singapore and Hong Kong

100

120

140

160

180

200

REIT Market Capitalisation (US$ Bn)

Japan Singapore Hong Kong Malaysia Korea Taiwan


0

20

40

60

80

100

Dec

2001

Dec

2002

Dec

2003

Dec

2004

Dec

2005

Dec

2006

Dec

2007

Dec

2008

Dec

2009

Dec

2010

Dec

2011

Dec

2012

Dec

2013

Nov

2014


Capital Raisings by Asia Pacific REITs

15,000

20,000

25,000

US$ mn


0

5,000

10,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD

Oct

'14Equity Debt

Source: APREA Research, SNL Financial (as of 31 October 2014)

Recent Listings

REIT Country Listing DateIPO Mkt Cap.

(US$ mn)

Nippon Healthcare Investment Corporation Japan 5 Nov 2014 116

Impact Growth REIT Thailand 1 Oct 2014 244

IREIT Global Singapore 16 Jul 2014 303

Frasers Hospitality Trust Singapore 10 Jul 2014 296

Invesco Office J-REIT Inc. Japan 5 Jun 2014 428


Invesco Office J-REIT Inc. Japan 5 Jun 2014 428

NIPPON REIT Investment Corp Japan 24 Apr 2014 368

Siri Prime Office Property Fund Thailand 9 Apr 2014 51

360 Capital Office Fund Australia 24 Mar 2014 142

Hulic REIT Inc. Japan 2 Jul 2014 791

OUE Commercial REIT Singapore 27 Jan 2014 543

Hemraj Industrial Property & Leasehold Fund Thailand 23 Jan 2014 135

Source: APREA Research, Bloomberg, SNL Financial

Lots of room for real estate securitisation in Asia Pacific

9,407

7,537 7,171

6,000

7,000

8,000

9,000

10,000

US$ bn

Commercial Real Estate Stock REIT Market Capitalisation

US$485 bn Gap; of which

China accounts for US$179 bn


2,443

157 (1.7%) 725 (9.6%)

240 (3.3%) 36 (1.5%) 0

1,000

2,000

3,000

4,000

5,000

Europe North America Asia Pacific Other

Source: Bloomberg, Pramerica “A Bird’s Eye View of Global Real Estate Markets 2012”, APREA Research

Potential Size of Asia Pacific Market by 2031?

44,937

30,000

35,000

40,000

45,000

50,000

US$ bn

Commercial Real Estate Stock REIT Market Capitalisation (2031)


7,171

19,085

4,314 (9.6%)

0

5,000

10,000

15,000

20,000

25,000

2011 2021 2031

Source: Bloomberg, Pramerica “A Bird’s Eye View of Global Real Estate Markets 2012”, APREA Research

Views from the Market (1 of 2)


Views from the Market (2 of 2)


REITs in China???


BUT

� No tax exemptions

� The REIT offers predetermined yields to investors, rather than paying out

90% of income; it has a fixed time frame of five years; and it is only open to

institutional investors.

China REITs can…

� Create jobs

� Develop the economy

� Improve productivity


� Fund social welfare

� Generate a US$200 bn opportunity today and a trillion dollar opportunity by2022

Thank you.


Professor Sr Dr. Ting Kien HwaFRICS, FRISM, MPEPS, MMIPPM

Head Centre for Real Estate Research ( COREResearch )Faculty of Architecture, Planning & Surveying

Universiti Teknologi MARA, 40450 Shah Alam, Selangor, Malaysia

Contact: [email protected]; [email protected] : 6012-666 1630

Fax : 603- 5544 4353

asia pacific reit markets – overview, characteristics … · 2nd international research...

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