2nd International Research ConferenceSecurities and Exchange Board of India
Mumbai, India 20 March 2015
Asia Pacific REIT Markets –
Overview, Characteristics and Performance
1An Overview of Asia Pacific REIT Markets
Overview, Characteristics and Performance
Professor Sr Dr. Ting Kien HwaFRISM, FRICS, MPEPS, MMIPPM
Head, Centre for Real Estate ResearchUniversiti Teknologi MARA (UiTM)
Academic MemberAsia Pacific Real Estate Association (APREA)
REITs were introduced in Asia in the early 2000s
2An Overview of Asia Pacific REIT Markets
� REITs did not exist in Asia prior to 2001.
(But in other form i.e. Listed Property Trusts in Australia,
NZ, Malaysia)
� The main impetus behind the creation of REIT in Asia was the
1997 Asia Financial Crisis.
3An Overview of Asia Pacific REIT Markets
� Many corporations were saddled with huge debts and
undervalued real estate.
� Regulators viewed REIT as a feasible route to recapitalise
corporate balance sheet and to revitalise the property market.
� Korea: corporate restructuring REITs were launched in 2002 to
take over assets of distressed firms.
� Japan : REITs as an alternative source to raise fund
� Taiwan : for financial institutions to divest non-core properties
� Singapore and Malaysia : REIT as a potential route to recycle
capital through the divestment of non-core real estate e.g.
4An Overview of Asia Pacific REIT Markets
capital through the divestment of non-core real estate e.g.
Starhill REIT
� Hong Kong : to lighten the balance sheet of GLCs e.g. Link REIT
Japan and China are the largest real estate markets in Asia
US$
6,156b
CountryMarket Size
(US$ bn)
Percentage
of Global
Market
Global Rank
Japan 2,484 10.4 2
China 1,424 6.0 4
South Korea 415 1.7 13
India 271 1.1 16
Singapore 204 0.9 21
44.9%4.9%
3.7%3.6%
3.1% 2.8%1.5%
1.3%
0.7%0.3%
Percentage of Asia Market
5An Overview of Asia Pacific REIT Markets
Source: Pramerica - “A Bird’s Eye View of Global Real Estate Markets”, APREA
Hong Kong 198 0.8 22
Taiwan 173 0.7 24
Indonesia 155 0.6 28
Thailand 81 0.3 36
Malaysia 73 0.3 39
Philippines 39 0.2 48
Vietnam 17 0.1 52
Total 5,534 23.1
44.9%
25.7%
7.5%
Japan China South Korea India
Singapore Hong Kong Taiwan Indonesia
Thailand Malaysia Philippines Vietnam
Asia’s REIT market is approximately 75x what it was in 2001
80
100
120
140
160
Number of REITs Market Capitalisation (US$ Bn)
6An Overview of Asia Pacific REIT Markets
Source: APREA Research, Bloomberg (as of 30 June 2013)
0
20
40
60
Socioeconomic Reasons to Introduce REITs
Economic Development Funding Social Welfare
7An Overview of Asia Pacific REIT Markets
Urban Productivity
Expertise Upgrading
Living Standards
Jobs Creation
Capital Markets Reasons to Introduce REITs
Diversification
Income stability
Inflation protection
8An Overview of Asia Pacific REIT Markets
Inflation protection
Long-term performance
Risk management
Diversification – can improve risk-adjusted returns
0.0%5.0%
10.0%15.0%20.0%
Volatility (3yr)
0.9Correlation (3yr)
8%
10%
12%
14%
16%
3y
r a
nn
ua
lise
d t
ota
l re
turn
TR/GPR/APREA
REIT
TR/GPR/APREA
Composite2
MSCI Asia
Pacific Equities
9An Overview of Asia Pacific REIT Markets
1As of 31 October 2014 and in US$2TR/GPR/APREA Composite Index includes REITs, landlords and developers that meet
the inclusion criteria
Source: GPR, APREA Research, Bloomberg
0.0%
2.5%
5.0%
Composite REIT
Yields
0.7
0.8
0%
2%
4%
6%
0% 5% 10% 15% 20%
3y
r a
nn
ua
lise
d t
ota
l re
turn
3yr volatility
JPM Govt
Bonds - APAC
Income Stability – to fund retirement cash flow
0%
10%
20%
30%
40%
50%Asia Pacific REITs
Income Return Price Movement
Average annual
income return:
6.2%
10An Overview of Asia Pacific REIT Markets
-60%
-50%
-40%
-30%
-20%
-10%
0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD
Oct
'14Source: GPR, APREA Research (as of 31 October 2014)
Inflation Protection – maintains the value of retirement nest eggs
8.00%
10.00%
12.00%
Asia Pacific REITs dividend yield vs. inflation
TR/GPR/APREA REIT Yield Asia CPI YoY
11An Overview of Asia Pacific REIT Markets
0.00%
2.00%
4.00%
6.00%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: GPR, APREA Research, Bloomberg
Long Term Performance – compares favourably to other asset classes
0
100
200
300
400
500
600
12An Overview of Asia Pacific REIT Markets
1As of 31 Oct 2014 and in US$2Annualised
Source: GPR, APREA Research, Bloomberg
TR/GPR/APREA REIT TR/GPR/APREA Composite MSCI Asia Pacific Equities
% Total Returns (USD) Oct-14 YTD 1yr 3yrs2 5yrs2 10yrs2
TR/GPR/APREA REIT 3.62 3.59 -0.78 13.08 8.95 9.42
TR/GPR/APREA Composite 3.42 13.91 7.16 14.09 13.57 8.06
MSCI Asia Pacific Equities 1.15 2.86 2.42 8.20 6.91 7.17
Listed Property with stocks and bond – optimises the portfolio
6.0%
6.5%
7.0%
Re
turn
(p
.a.) 25% Global
Listed Property
40% Global
Listed Property
13An Overview of Asia Pacific REIT Markets
5.0%
5.5%
6.0%
10.0% 10.5% 11.0% 11.5%
Re
turn
(p
.a.)
Volatility (p.a.)
0% Global Listed
Property
Source: Atchison Consultants, S&P/Citigroup (2014)
REIT regimes across Asia Pacific
CountryManagement
Structure
Geographic
Restrictions
Property
Development
Gearing
Restrictions
Dividend
Payout
AustraliaInternal /
ExternalNone Yes None 100%
Japan External None Restricted None ≥ 90%
Singapore External None < 10%< 35% of
asset value≥ 90%
Hong KongInternal /
None < 10%< 45% of
≥ 90%
14An Overview of Asia Pacific REIT Markets
Hong KongInternal /
ExternalNone < 10%
< 45% of
asset value≥ 90%
Malaysia External None No< 50% of
asset value≥ 90%
TaiwanInternal /
ExternalNone No
< 50% of
asset value100%
Thailand External None < 10%< 60% of
asset value≥ 90%
S. KoreaInternal /
ExternalNone < 30% None ≥ 90%
India External None < 20%< 50% of
asset value≥ 90%
Typical REIT Structure in Asia (external management)
15An Overview of Asia Pacific REIT Markets
Types of REITs
Office Retail Industrial
16An Overview of Asia Pacific REIT Markets
Hospitality
Tele-communication
towers
Healthcare
Oil palm plantations
Residential
Railroad
Asia’s REIT market has grown rapidly
100
120
140
160
180
200
Number of REITs Market Capitalisation (US$ Bn)
17An Overview of Asia Pacific REIT Markets
Source: APREA Research, Bloomberg (as of 30 November 2014)
0
20
40
60
80
100
And also in relative importance
60%
80%
100%
Proportion of Global REIT Market Capitalisation
Asia Oceania Europe North America Other
18An Overview of Asia Pacific REIT Markets
Source: APREA Research, Bloomberg (as of 30 November 2014)
0%
20%
40%
Dec
2001
Dec
2002
Dec
2003
Dec
2004
Dec
2005
Dec
2006
Dec
2007
Dec
2008
Dec
2009
Dec
2010
Dec
2011
Dec
2012
Dec
2013
Nov
2014
Growth has been concentrated in Japan, Singapore and Hong Kong
100
120
140
160
180
200
REIT Market Capitalisation (US$ Bn)
Japan Singapore Hong Kong Malaysia Korea Taiwan
19An Overview of Asia Pacific REIT Markets
0
20
40
60
80
100
Dec
2001
Dec
2002
Dec
2003
Dec
2004
Dec
2005
Dec
2006
Dec
2007
Dec
2008
Dec
2009
Dec
2010
Dec
2011
Dec
2012
Dec
2013
Nov
2014
Source: APREA Research, Bloomberg (as of 30 November 2014)
Capital Raisings by Asia Pacific REITs
15,000
20,000
25,000
US$ mn
20An Overview of Asia Pacific REIT Markets
0
5,000
10,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD
Oct
'14Equity Debt
Source: APREA Research, SNL Financial (as of 31 October 2014)
Recent Listings
REIT Country Listing DateIPO Mkt Cap.
(US$ mn)
Nippon Healthcare Investment Corporation Japan 5 Nov 2014 116
Impact Growth REIT Thailand 1 Oct 2014 244
IREIT Global Singapore 16 Jul 2014 303
Frasers Hospitality Trust Singapore 10 Jul 2014 296
Invesco Office J-REIT Inc. Japan 5 Jun 2014 428
21An Overview of Asia Pacific REIT Markets
Invesco Office J-REIT Inc. Japan 5 Jun 2014 428
NIPPON REIT Investment Corp Japan 24 Apr 2014 368
Siri Prime Office Property Fund Thailand 9 Apr 2014 51
360 Capital Office Fund Australia 24 Mar 2014 142
Hulic REIT Inc. Japan 2 Jul 2014 791
OUE Commercial REIT Singapore 27 Jan 2014 543
Hemraj Industrial Property & Leasehold Fund Thailand 23 Jan 2014 135
Source: APREA Research, Bloomberg, SNL Financial
Lots of room for real estate securitisation in Asia Pacific
9,407
7,537 7,171
6,000
7,000
8,000
9,000
10,000
US$ bn
Commercial Real Estate Stock REIT Market Capitalisation
US$485 bn Gap; of which
China accounts for US$179 bn
22An Overview of Asia Pacific REIT Markets
2,443
157 (1.7%) 725 (9.6%)
240 (3.3%) 36 (1.5%) 0
1,000
2,000
3,000
4,000
5,000
Europe North America Asia Pacific Other
Source: Bloomberg, Pramerica “A Bird’s Eye View of Global Real Estate Markets 2012”, APREA Research
Potential Size of Asia Pacific Market by 2031?
44,937
30,000
35,000
40,000
45,000
50,000
US$ bn
Commercial Real Estate Stock REIT Market Capitalisation (2031)
23An Overview of Asia Pacific REIT Markets
7,171
19,085
4,314 (9.6%)
0
5,000
10,000
15,000
20,000
25,000
2011 2021 2031
Source: Bloomberg, Pramerica “A Bird’s Eye View of Global Real Estate Markets 2012”, APREA Research
Views from the Market (1 of 2)
24An Overview of Asia Pacific REIT Markets
Views from the Market (2 of 2)
25An Overview of Asia Pacific REIT Markets
REITs in China???
26An Overview of Asia Pacific REIT Markets
BUT
� No tax exemptions
� The REIT offers predetermined yields to investors, rather than paying out
90% of income; it has a fixed time frame of five years; and it is only open to
institutional investors.
China REITs can…
� Create jobs
� Develop the economy
� Improve productivity
27An Overview of Asia Pacific REIT Markets
� Fund social welfare
� Generate a US$200 bn opportunity today and a trillion dollar opportunity by2022
Thank you.
28An Overview of Asia Pacific REIT Markets
Professor Sr Dr. Ting Kien HwaFRICS, FRISM, MPEPS, MMIPPM
Head Centre for Real Estate Research ( COREResearch )Faculty of Architecture, Planning & Surveying
Universiti Teknologi MARA, 40450 Shah Alam, Selangor, Malaysia
Contact: [email protected]; [email protected] : 6012-666 1630
Fax : 603- 5544 4353