Wednesday, September 27, 2006
[RealEdge] BT : Property funds upbeat on Singapore
| Published September 27, 2006  | |||
| Property funds upbeat on Singapore Rising rents, corporate expansion, thriving Reits are factors (HONG KONG/SINGAPORE) Rising rents, corporate expansion and thriving property trusts are combining with Singapore's reputation as an easy business environment to produce a blend many property fund managers find irresistible. Asia's financial crisis in 1997/98 and then the bursting of the dotcom bubble ravaged Singapore's commercial property before new real estate investment trusts (Reits) began to raise funds on the stock market to spur a rash of deals to help revive the market. Empty tower blocks are now a thing of the past, with occupancy up to 92 per cent from a trough of 83 per cent in 2001. Rents have risen about a third in that time, with top-notch buildings charging 20 per cent more now than at the start of 2006. Consultants CB Richard Ellis predict another 30-40 per cent rise in the next couple of years. Investment bank Credit Suisse, for example, has said it would add up to 1,400 employees to its back-office operations, tripling its office space with 110,000 square feet in swanky new city centre office complex One Raffles Quay. UBS is setting up a campus to train wealth managers in the Asia Pacific region, offering courses lasting up to six weeks at a time for around 5,000 students. Keen on the city's ambitions as a hub for finance, health care services and biotechnology, fund managers are promoting property investment as a perfect 'Singapore play'. 'I feel it's just the start in Singapore,' said Sanjay Lodha, a senior investment adviser at Swiss private bank Pictet & Cie in Hong Kong. The building of US$2 billion casino resorts, due to open from 2009, is expected to give the economy a further fillip. To boost its 4.4 million population, the government has also announced intentions to woo foreign professionals to settle. 'As a location for headquarters within the Asian context, its role is just emerging,' Mr Lodha said. 'There's a virtual cycle of net immigration and allowing the cream of Asia to come in.' CLSA analyst Emily Loh was similarly upbeat on office rents, recommending stocks with over 40 per cent exposure to office market, such as Keppel Land Ltd, United Overseas Land, and Reits CapitaCommercial Trust and K-Reit Asia. Although the Singapore property index is up about 30 per cent this year, Ms Loh said rising office prices made the stocks good value. Net asset value for Keppel Land, for example, will grow 70 per cent by the end of 2007, she forecasts. 'Basically now, there's very little downside,' she said. 'Risk is more external than internal - global economic slowdown, global terrorism, even bird flu.' Derek Cheung, a fund manager at Cohen and Steers, which has just launched a property mutual fund for Asia, said Singapore property values will benefit from an influx of capital into Asia's vibrant economies as US interest rates start to fall. 'We'll see another overheating, 'And there's a severe shortage of supply in Singapore. Rents are lagging and still cheap.' The average annual cost of occupying a prime office in Singapore is US$42 per square foot, according to CB Richard Ellis, compared with US$101 in Hong Kong, US$130 in Tokyo and US$185 in London. But Moray Armstrong, executive director at CB Richard Ellis in Singapore, believes the market will start to level out in a year or two. 'The swiftly accelerating rents will start to ease when the financial community decides to expand at a more modest rate,' he said. Fund managers say one of the best things about Singapore is the ambition of its all-powerful government to create the perfect business environment. Singapore, where setting up a business only takes six days, is consistently ranked as one of the freest economies. It only takes, on average, nine days to register a property, according to the World Bank, compared to 14 days in Japan and 54 days in Hong Kong. Mark Fogle, Asia managing director for the property investment arm of US insurance giant American International Group, said the investor-friendly attitude shone through when Singapore asked for advice in drawing up guidelines for the Reit market in the early 2000s. 'I wrote 15 points and they incorporated 13,' Mr Fogle said. 'Personally, I take my hat off to them. The Reit market has added a layer of transparency and a good stable platform for the real estate market, and that's good for the economy.' - Reuters | |||
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