OREANDA-NEWS. Commercial property is commonly associated with office buildings than can include suburban multi-storied structures to skyscrapers in a central business district. Investing in the majority of these properties has traditionally been reserved to the world’s most capitalised investors. However, rather than keeping ownership in these properties to a small number of investors or constricting working capital to debt , many of these properties are listed as real estate investment trusts (REITS) on global stock markets.

Investing in these REITs allow investors to share the income generated by the tenants of the properties, at the same time bearing the risks associated with the value of the property assets and the costs of financing the property.

Across the world there are more than 100 stocks that represent the Office REIT sector as defined by the Global Industry Classification Standards (GICS®). In the year thus far, office REITS have averaged a 2% decline in price, however income associated with the office property boost that return to a marginal gain. The average dividend yield for the sector is approximately 4.6%.

Office REITs listed in Singapore

GICS®, which is also used to categorised sectors on SGX StockFacts, classifies Office REITs as companies or trusts engaged in the acquisition, development, ownership, leasing, management and operation of office properties.

Singapore Exchange (SGX) lists 28 REITs and six stapled trusts, of which five REITs are categorized as Office REITs - CapitaLand Commercial Trust, Keppel REIT, Frasers Commercial Trust, OUE Commercial REIT and IREIT Global.

Note that other REITs listed on SGX can include office buildings in their portfolio, however report their majority revenue in other property types. An example is Mapletree Commercial Trust which invests in office buildings however reports the majority of its revenue to retail properties and is hence designated as a Retail REIT. Please also note that Viva Industrial Trust is categorised as a Diversified REIT effective the close today.

The five Office REITs have a combined market capitalisation of S$10.2 billion, and trade at an average price-earnings ratio of 8.5. They maintain an average dividend yield of 6.5%. In the year thus far, the trusts averaged a price change of -4.1%, and dividend adjusted returns of -1.5%. This brought their 1-year average returns to 4.1%.

Singapore’s three Office REITs with a three year trading history - CapitaLand Commercial Trust, Keppel REIT and Frasers Commercial Trust – have averaged total returns of 54.2% over the three year period – or 15.3% on an annualised basis.

The most recent addition to the group was IREIT Global, which was listed on SGX in August 2014. IREIT Global is the first SGX-listed Commercial REIT focusing only on real estate in Europe.

OUE Commercial REIT was listed in January 2014 and has recently announced a Rights Issue as Part of a Financing Plan for the Proposed Acquisition of an Indirect Interest in One Raffles Place. The table below is sorted based on market capitalisation. Please note that clicking on a stock’s name will take you to its relevant page on StockFacts.

Source: SGX StockFacts (data as of 289 June 2015)

The trusts trading closest to their 12 month highs are OUE Commercial REIT, Frasers Commercial Trust, and IREIT Global.

Source: SGX StockFacts (data as of 29 June 2015)

Preliminary Prospectus Registered for Manulife US REIT

Yesterday, a prospectus for Manulife US REIT was lodged on the Monetary Authority of Singapore (MAS) Offers and prospectuses electronic repository and access (OPERA) page.

As noted in the prospectus, the initial portfolio of Manulife US REIT will comprise three office properties in the United States, with an aggregate net lettable area (“Net Lettable Area” or “NLA”) of 1,464,267 square ft. These three properties consist of:

  • M Street: a 12-storey Class A office building in Washington, D.C.’s CBD;
  • Figueroa:  a 35-storey Class A office building in the South Park district of Downtown Los Angeles; and
  • Michelson: a 19-storey, high-rise office building in Irvine, Orange County, within the Greater Los Angeles.

The Sponsor of the proposed REIT - the Manufacturer’s Life Insurance Company (“Manulife”) - is part of the

Manulife group. According to the prospectus, this is the first pure-play U.S. office REIT to be listed in Asia. Manulife US REIT will be the first publicly-listed REIT platform by Manulife.

REITs listed on SGX that distribute at least 90% of its distributable income to the unit holders are granted tax transparency by IRAS and taxed only in the hands of unitholders.