Investing in Singapore Real Estate
The Suntec City forms a significant portion of Singapore’s Marina downtown. Its five office towers and connecting shopping mall were built on reclaimed land off Beach Road - it is now a prime destination, attracting shoppers and diners in the weekends and power suites during the weekday.
Singapore has launched several real-estate investment trusts (REITs) in the last two years. The intent of an REIT is to incorporate a unit trust that owns the property and pays dividends according to the rental income that the property generates. It allows the owner to divest itself of capital holdings and to improve its liquidity so that they can invest in other projects. For the investor, it allows participantion in the industrial and commercial property market without the need to commit huge amounts of capital and at the same time benefiting from the income stability as well as any potential appreciation in property valuations.
Suntec City launched its IPO last week, and it offered dividend yields of up to 6% at the IPO price. Other comparitive REITs around the island have yields of between 3-4% at current market prices, which makes this an exceptionally good deal. Its almost a no-brainer - the market will price it upwards so that its yield would be comparitive to the other REITs. Other plus factors for this offering is the prime location and the potential growth in income because its rental rates are below average since its rates have not recovered to the pre-SARS levels.
This successful offering is likely to attract other property owners to launch other REITs. Many Asians (businesses and individuals) have an attraction to owning property. Which means that lots of Singapore corporations out there have their cash tied up in property assets. Watch out for some of these being turned into REITs in 2005.