The two cities have already snapped up 40% of all listed Asian Reits outside of Japan. Light but effective regulation, tax concessions and deep and liquid capital markets mean that even cross-border Reits, overseas property assets structured in an offshore trust, are proving popular.
The picture for the rest of non-Japan Asia is more mixed. Some territories have enacted Reit legislation, including Taiwan, Thailand, Korea and Malaysia, but most of the Reits issued to date have been small and heavily focused domestically. Moreover, some of the existing regulations remain restrictive: foreign assets are prohibited in Thailand, as is gearing, and there are no tax concessions. Borrowing is also heavily restricted in Taiwan, Korea and Malaysia and, in the case of the latter two, there are no tax concessions available to investors.
In China, Indonesia, India and the Philippines, Reit legislation has not even been enacted yet, although the Philippine and Indian authorities are believed to be considering framing regulations. China’s Reit market is likely to migrate quickly to Hong Kong: GZI Reit, a vehicle of the Guangzhou government, is already listed in Hong Kong.
The biggest winner from Asia’s general lack of progress with Reits, analysts say, is Singapore where the government has been quick to spot the market opportunity. In addition to a strong pipeline of domestic issues, Singapore Reits or S-Reits are already being planned for Indian, Filipino and Indonesian assets. Singapore sponsors are also actively seeking suitable assets for Reits in Vietnam.
Even if Reit legislation is eventually forthcoming from these countries, it might prove to be too late. After all, investors tend to migrate to the most efficient markets, as Mark Ebbinghaus, executive director, joint head of real estate, lodging & leisure – Asia at UBS, explains. “At the end of the day, you can get the regulations,” he says, “but can you attract the capital? Singapore has really exploited the first-mover advantage.”
