Tuesday, July 17, 2012

Property investment deals pick up in Q2

Straits Times: Tue, Jul 17

INVESTMENT activity in the real estate sector picked up in the second quarter, but analysts from DTZ Research expect that overall activity this year will not be as strong as last year's.

According to a report released by DTZ Research yesterday, real estate investment activity rose to $6.9 billion in the three months to June 30, up 48 per cent from the first three months of the year.

This brings the total value of all property investment deals in the first half of the year to $11.6 billion, lower than the $17.1 billion worth of deals completed in the same period last year.

Property firms were still the most active investors in the quarter, accounting for about 74 per cent of investment transactions.

Between April and June, property firms bought office buildings Tower Fifteen and KeyPoint, and retail mall Hougang Plaza, among others.

They were also active in the purchase of Government Land Sales (GLS) sites, snapping up all GLS sites for sale during the quarter, except for an industrial site which was bought by a civil engineering firm.

From being net buyers in the first three months of the year, real estate investment trusts (Reits) became net sellers in the second quarter as they sold assets to unlock value for their unitholders.

Frasers Commercial Trust sold KeyPoint, CapitaMall Trust sold Hougang Plaza, and Ascendas Reit sold off a warehouse property at 6 Pioneer Walk.

These sales amounted to $511.1 million, while acquisitions by Reits fell 61 per cent from the first quarter to $290.1 million.

In fact, there were only two Reit investments in the second quarter - Cache Logistics Trust acquired Pandan Logistics Hub and K-Reit increased its stake in Ocean Financial Centre.

Cross-border investment accounted for 16 per cent of real estate investment activity in the second quarter, DTZ Research said, amounting to $1.1 billion.

The deals included the purchase of industrial building StarHub Green by US-based Blackstone Group for $210 million, and the purchase of Compass Point by Prudential's Asia Property Fund in a joint venture with Frasers Centrepoint for $519 million.

DTZ Research said investment activity in the next six months will likely be dominated by developers purchasing GLS sites and Reit activity.

These include the divestment of Somerset Grand Cairnhill by Ascott Residence Trust to CapitaLand and expected listings of Far East Hospitality Trust and Ascendas Hospitality Trust.

Nevertheless, investment activity this year is likely to be lower than last year, said Mr Shaun Poh, head of DTZ Investment Advisory Services and Auction.

'Deals are taking longer to complete as there are more sellers than buyers in the market and there is still a pricing gap between sellers and buyers' expectations.'

Ms Chua Chor Hoon, DTZ's head of Asia Pacific research, added: 'Although we see an increase in inquiries from foreign investors, they are also looking to other countries, such as China, Japan and Australia, for growth opportunities and higher yields.

'Against this backdrop, 2012 investment sales activity is likely to be less than 2011's $28.6 billion.'

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
Email: marshe_inc@yahoo.com.sg
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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