Asian REITs' total first half market capitalization up 25%

Yet weighted average dividend yield contracted to 6.86 per cent in the first half of 2010.

Six new REITs were launched during the first six months of the year in what was a dynamic period for REIT IPOs in Asia, followed by two additional REIT listings in July. Total market capitalization of Asian REITs surged by 24.7 per cent year- on- year to US$69.0 billion during the first six months of 2010, according to CB Richard Ellis’ REITs Around Asia half yearly report.

“Despite increased listing activity, the fortunes of Asian REITs still remained mixed. During the first half of the year some markets have seen strong growth in IPO and acquisition activity and others have witnessed delisting applications, mergers and consolidations. REITs in Japan, Taiwan, Korea and Hong Kong outperformed their respective stock markets, all of which suffered downward adjustments in the second quarter amid concerns over the pace of the global economic recovery,” said Mr. Andrew Ness, Executive Director, CBRE Research Asia.

Two new REITs were launched in Korea during the first half with the KOCREF 15 REIT and Golden Narae Real Estate Development REIT raising KRW 25 billion (US$20.5 million) and KRW 145 billion (US$118.6 million) respectively. Singapore- listed Fortune REIT became the first Asian REIT to obtain a dual listing, following a listing in Hong Kong. Fortune REIT has a portfolio of suburban retail malls and other properties in Hong Kong.

Cache Logistic Trust, which has a portfolio of six logistic properties valued at S$730 million, was also successfully launched onto the Singapore REIT market in April. Thailand saw the listing of one new property fund, the Thai Commercial Investment Fund, during the first half. Malaysia also witnessed new listing activity with Sunway REIT and CapitalMalls Malaysia Trust, two of the largest M- REITs, finalising their IPOs in July.

The first half saw acquisition activity by Asian REITs rebound sharply with a total of US$5.7 billion worth of deals completed in the first six months of the year, surpassing the US$4.2 billion recorded for the whole of 2009.

Japan remained the most active market for asset purchases with Mori Trust Sogo REIT’s JPY 110 billion (US$1.24 billion) acquisition of a 50 per cent stake in the Tokyo Shiodome Building the largest transaction completed by a REIT in Asia in the first half of 2010. Singaporean and Malaysian REITs were active buyers of office, retail, industrial and healthcare assets while REITs in Hong Kong, Taiwan, Korea and Thailand remained inactive.

The J- REIT sector saw a number of mergers and acquisitions. In the most notable example, Nippon Commercial Investment and United Urban Investment announced plans to merge. The combined entity will have an asset value of JPY 458 billion (US$5.2 billion), ranking it among the top five J- REITs in the country. Following the latest round of mergers and consolidations the total number of J-REITs stood at 35, down from 42 operating at the peak of the market.

Elsewhere, a number of Asian REITs opted to delist during the first half, with the RREEF CCT REIT in Hong Kong and the KR2 REIT both filing for termination. After a series of REIT delistings and liquidation rumors investors may demand stronger stock performance along with rising asset prices.

“Although the weighted average dividend yield for Asian REITs contracted from 8.06 per cent in the first half of 2009 to 6.86 per cent in the first half of 2010, REITs generally still provide comparatively high dividends when compared with government bonds. During the next six months Asian REITs should recapitalise with ease and will continue to acquire new assets and raise new funds. In light of rising concerns over the pace of the global economic recovery Asian REITs are expected to perform steadily over the remainder of the year, in contrast to the rapid gains during the first half,” said Mr. Andrew Ness.