S. Shanker

Mumbai, Dec. 31 With India set to join the league of REIT (real estate investment trust) market countries, it is interesting to note that the Asian REIT markets have scored globally in terms of stock price, total returns and dividend yields.

An Ernst and Young REIT Market Review 2007 says Asia is the ‘new REIT tiger’ and three of the top-five performers by total return were Asian countries, with Singapore in the lead.

The report says the global REIT market (across 15 countries) has grown against all key indices, including market capitalisation, volume of trading over the year, and total rates of return. It has grown to a total market capitalisation of $764 billion, against $608 billion 12 months ago, and the total real estate owned by REITs globally stands at $1.273 trillion.

The number of Singapore REITs rose from 11 in June 2006 to 16 at the end of June 2007. The total volume of trade increased to about $11 billion this year, up from $4 billion last year. From a low TROR (total rate of return) in 2006 of only 1.7 per cent, Singapore achieved an average TROR, across all REITs, of 72.92 per cent in 2007. And, the premium of market price to net assets jumped from 10.92 per cent in June 2006 to 71.11 per cent in June 2007.

Japan’s REIT market has been boosted by increased activity in the stock market and from foreign investors showing interest in real estate. Three-year rate of return for REITs now stood at 24.46 per cent.

The market capitalisation in Japanese REITs increased from $31 billion to $49 billion over the year to June 30, 2007.

Despite a relatively small size, the South Korean REIT market has achieved impressive stock prices and dividend yields due to increasing office rentals, as well as rising debt levels.

With a market capitalisation of $604 million on June 30, 2007, REIT stock prices had a very big year. It logged the second-highest one-year TROR of all countries at 42.66 per cent, against 7.86 per cent TROR last year.

The market recorded the highest dividend yield of all REIT countries, with 9.13 per cent, though the results were based on only three Korea REITs with reportable results during the period.

In general, REITs in the US performed poorly with reduced returns that lag other benchmark indices and yield-oriented investments, including the 10-year Treasury bond.

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(This article was published in the Business Line print edition dated January 1, 2008)
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