Analysts say an upcoming new listing of a trust that holds German office assets will add diversity and depth to the real estate investment trust (Reit) sector here.
Property and market consultants told The Straits Times that IReit Global Group offers an attractive proposition for investors, with a projected distribution per unit yield of 8 per cent next year.
But the debut could be hit by poor market conditions due to geopolitical concerns over, for example, impending United States air strikes against militants in Iraq.
OCBC Investment Research analyst Eli Lee said the 8 per cent forward yield offers a 130-200 basis point spread above average forward yields for Singapore Reits (S-Reits).
For instance, the office S-Reit subsector's average forward yield is 6 per cent, while the overall sector has an average of 6.7 per cent.
"That said, unlike IReit, which holds properties in Germany, the typical office S-Reit has the bulk of its portfolio exposure here," said Mr Lee.
"The differences in key geographical drivers could lead to meaningful divergences ahead, in terms of rental outlook, occupancy trends and reversion profiles."
Voyage Research deputy research head Ng Kian Teck noted that S-Reits have performed well, with most reporting second-quarter earnings that are either in line with or better than expectations.
IReit will have to dangle higher yields if it wants local investors to put their money into assets they are not very familiar with in a place that is half a world away.
Mr Ng added that market conditions have not been favourable for initial public offerings (IPO).
The two most recent entrants, Accordia Golf Trust and Terratech, have both sunk into the red since making their debuts in the past two weeks, and have yet to hit their IPO prices.
Mr Ng said: "The poor performances are fresh in the minds of investors, and with IReit coming behind them, the timing is not good.
"There's a lot of uncertainty now, with global markets not doing well, but a good asset is a good asset, and investors will come in, especially since Reits are usually held for the longer term."
Overseas trusts such as IReit also face inherent challenges, including currency exchange losses from a strengthening Singapore dollar, and subject potential investors to higher risks, noted Mr Ng.
Mr Donald Han, managing director of property consultancy Chestertons, pointed out that some Singapore-listed overseas Reits have done well, particularly those from growing economies.
They include Ascendas India Trust, Global Logistics Properties and Mapletree Greater China Commercial Trust, whose owners have been around for a long while.
Mr Han said Germany is considered a safe haven among European countries and is one of the key drivers of growth for the region.
"IReit's 8 per cent yield is fairly attractive compared with yields for Singapore's prime office sector, which are less than 4 per cent," he added.
"Yields for business parks and office space are also well below 6 per cent, even in major German cities such as Munich and Frankfurt." Analysts warned that IReit's assets are mostly in second-tier German cities and highly reliant on a single tenant.
Three of its properties are leased to GMG, a unit of Deutsche Telekom, and the four office properties that make up the initial portfolio are in the cities of Bonn, Darmstadt, Munster and Munich.
The company has priced the IPO at 88 cents a unit, and 167.7 million units will be available.
The public offer closes next Monday. Trading is expected to start next Wednesday.
No comments:
Post a Comment