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REIT recovery uncertain

The downward trend in Asian property markets is set to last through 2009, and it is unclear whether a recovery will begin in 2010, according to CB Richard Ellis. The consulting firm said in a recent report that the downturn will hit rental incomes and asset valuations of real estate investment trusts (REITs) accross the region.

REITs around Asia saw their market capitalisation fall by almost a third over the second half of 2008 to around US$48 billion as prices took a steep dive and new listings dried up.

Nearly all REITs in the region recorded a fall in value, with just two recording a marginal uptick. Many plunged by over 30% during the review period.

There were seven new REIT listings over 2008 but the second half saw only one debut _ Thailand's Centara Hotels & Resorts Leasehold Property Fund _ which brought the total number of REITs in Asia up to 115 at the year-end.

CBRE saw the second half of 2008 as a trying period for the Thai stock market and property funds.

As capital market liquidity dried up, the total number of property funds in Thailand reached 21 with one new listing during the second half of the year. Total market capitalisation fell 18.5% during the same period as prices sank.

Listed property funds in Thailand performed variably during the second half: eight funds hung within the -1% to 2% band but six others plunged over 20%.

The dividend yield for Thai listed property funds thus ended with a wide range of 0.4-17.8%, mainly down to the general performance of underlying assets.

''Some observers expect an increase in property fund listings in 2009 as developers search for alternate sources of capital. A key feature that differentiates Thai public listed property funds from other REITs in Asia is that Thai REITs have virtually no gearing,'' said Nabeel Hussain, manager of CBRE Research in Thailand.

The firm said that REITs holding income-generating properties in good locations will be better placed, as many have secured tenancy for the year
Bangkok Post Feb 24, 2008