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Treasury & Capital Markets
REIT market continues to expand in Asia
Solid pipeline of deals in India and the Philippines
Darryl Yu 9 Feb 2021

Despite economic uncertainties brought about by the Covid-19 pandemic, REIT (real estate investment trust) development remains robust in Asia with listings in new markets such as India and the Philippines over the past couple of years.

Traditionally REIT listing locations have remained consistent in Asia with many entities looking at markets such as Japan or Singapore to go public in the past. As of the second quarter of 2020, Japan was the largest REIT market in the region with a market capitalization of close to US$200 billion, according to data from the Bank for International Settlements.  

At the start of 2021, India continued to expand its domestic REIT portfolio. The recent listing of Brookfield REIT saw strong demand, with the institutional and retail tranches oversubscribed 4.8 times and 11.78 times respectively. Brookfield REIT is the third such deal in India, following the listings of Embassy Office Parks REIT in 2019 and Mindspace Business Park REIT last year.

The Philippines is also witnessing the rapid development of its REIT market. Having crafted the initial REIT law back 2009, the Southeast Asian nation didn’t see its first REIT listing until last summer when Ayala Land AREIT raised around 12.3 billion pesos (US$280 million) in its domestic initial public offering. It was the years of hard work with various government regulators around such issues as minimum public ownership requirements and qualifications of REIT fund/property managers.

Since the successful listing of AREIT, other property developers in the country have started to make plans for their own listings. In November 2020 DoubleDragon unveiled plans to raise up to 14.7 billion pesos via a public offering. Filinvest in January 2021 announced moves to restructure its portfolio of leasable assets which consists of BPO (business process outsourcing) tenants into a REIT format.     

While investment demand for REITs in the two countries has been healthy, there are still some institutional investors who tend to prefer one jurisdiction over another.

“From an institutional investor standpoint, we don’t think there is much value on the table there in the Philippines as there is not a lot of liquidity in the REITs. The captive demand for REITs in the country has been from the retail investors,” explains Shern-Ling Koh, portfolio manager at Principal Real Estate Investors. “When you look at Philippine REITs, you need to look at the assets that are being put in, they are primarily office assets where demand has come from these Chinese gaming companies as well as BPOs. In India it’s also BPOs, but high value-added BPOs. India has moved up the value chain from voice BPOs into high value-added IT-related services like backend coding, medical transcription, etc.”

Koh goes on to explain that while there are short-term challenges for Indian REITs, he favours their liquidity and the fact that they are private equity-backed. While markets such as Japan and Singapore will continue to be favoured financial hubs for REIT listings, it will be exciting to see how other countries in Asia will develop their own REIT market.

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