Singapore real estate investment trusts (S-REITs) with overseas assets are trading at a discount compared to those that invests in local real estate assets, according to Citywire A-rated Pearly Yap.
Meanwhile, smaller REITs are also trading at a discount to larger REITs.
‘We are value focused. This year has presented more volatility and with that, opportunity to buy select REITs at better prices. Logistics assets that have high yields are attractive,’ Yap, who manages the Eastspring Investments- Asian property fund, told Citywire Asia.
She said opportunities to invest in value assets are especially apparent among REIT managers with funding advantages, such as those who have locked in low interest rates over the next few years and those with access to overseas markets for growth.
Yap said she likes REIT managers that can add value in raising rents in low occupancy projects, improving the tenant mix, as well as buying or selling assets at the right time in the cycle to boost overall shareholder value.
She also likes managers that a proven track record in asset acquisitions and divestments.
However, the key challenges today are lack of good quality and attractively-valued assets to buy in Asia Pacific, particularly in an environment where capitalization rates have continued to compress.
‘We are nearing the end of a low interest rate environment. However, we are also in an environment of high fund manager fees as well as asset acquisition and divestment fees,’ Yap said.
As currencies have become increasingly volatile this year, fund managers would also have to be careful to match their currency exposures both on the income and asset levels.
An unmatched capital or income position might result in lower shareholder distribution per unit or book value.
What’s more, asset hoarding could also be an issue. Fund managers must look after the interests of unitholders and not just store expensive assets with unrealised capital gains for high asset management fees.