Whats hot/ not hot about Singapore REIT thats attracting DLF, Unitech, Indiabulls

Advantages of Reits over other investment instruments

• Offer investors exposure to professionally managed real estate with a small capital outlay and relatively low volatility
• Highly liquid as compared to owning actual real estate property as they are publicly traded. Investors also have the potential for capital gains
• REITs are required to distribute at least 90% of income to unit holders while listed companies may choose not to distribute dividends
• There is a low correlation between REITs and conventional asset classes thus providing diversification away from stocks and bonds within an investment portfolio. This contrary behavior is caused by the simple fact that real estate earnings don't behave like corporate earnings. Earnings from buildings are generated from long-term leases providing stable returns, while corporate earnings vary monthly, based on sales
• Most categories of investors enjoy tax exemption on distributed income (the individuals) or exemption from tax at source

Trends of Singapore REITs

• At least six of Singapore's 20 listed REITs are valued below what their properties are worth, as are many trusts in Japan and Australia, which means expansion is hampered by higher financing costs and investor returns are limited
• The success of early Reits encouraged more players into the market, all hoping to replicate the same growth strategy. This quickly led to an asset squeeze, made worse as other new players - such as private equity and property funds - entered the market. The buying spree mopped up all the quality properties, pushing up valuations while bringing down yields
  
• One theme for 2008 could be M&A activity in the S-Reit market

Future listing possibilities

• Indiabulls recently raised $259mn by listing its trust although it was undersubscribed in the retail segment
• DLF Assets will tap the Singapore market for their REITs, after having deferred their plans earlier this year due to market volatility. DOT had purchased properties from DLF Ltd at a fixed cap rate of 9%, which is quite high in the international market. If the true cap rate is discovered at a lower rate during the IPO, yield compression benefits will be passed on to DLF Ltd’s shareholders
• Unitech, which has the required approvals, has no immediate plans of going ahead with its $700mn REIT