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Investment Marketbeat Report

Christine Li • 14/10/2020

Singapore’s GDP Contracts Due To Circuit Breaker

Singapore’s GDP contracted at -13.2% yoy in Q2 2020 as the circuit breaker period inflicted a toll on the economy. However, the decline was mostly due to the transportation & storage and accommodation & food services sectors. The information & communications sector was resilient, declining by only -0.5% yoy, while the finance & insurance sector expanded by 3.4% yoy. The government narrowed its full-year GDP growth forecast range to between -7.0 and -5.0%.

Commercial REIT Activities Led to Surge in Investment Volume

The Q3 2020 investment volume surged to $14.14 billion, 4.5 times that of Q2 2020’s volume of $3.15 billion. This was predominantly due to commercial REIT activities, which bolstered the Q3 2020 commercial volume to $12.76 billion, 6 times that of $2.02 billion in Q2 2020. As a result, the commercial sector accounted for 90% of Q3 2020’s total volume.

An uptick in REIT activity led to a surge in investment volume during the third quarter. The largest deal of the quarter was the merger between CapitaLand Mall Trust and CapitaLand Commercial Trust, structured as CapitaLand Mall Trust acquiring CapitaLand Commercial Trust. This resulted in $10.01 billion worth of investment volume (by valuation) from the acquisition of CapitaLand Commercial Trust’s office portfolio, which includes Asia Square Tower 2, CapitaGreen, Capital Tower, Six Battery Road, 21 Collyer Quay, a 60% stake in Raffles City Singapore, a 50% stake in One George Street, and a 45% stake in CapitaSpring. The merger between the two REITs will be accretive for the both sets of unitholders and result in greater economies of scale.

In the retail sector, Frasers Centrepoint Trust is acquiring the remaining 63.11% stake of AsiaRetail Fund which it already had a partial stake in. This resulted in $1.93 billion of investment volume arising from 63.11% of the agreed property value of $3.07 billion. This move will grant Frasers Centrepoint Trust full control over five suburban malls – Tiong Bahru Plaza, White Sands, Hougang Mall, Century Square, Tampines 1, along with the Central Plaza office property. This acquisition at a yield of 5.0% will strengthen the REIT as suburban malls have been resilient during the pandemic due to their high proportion of essential services and will continue benefiting in the future from the government’s decentralisation initiative.

In addition, Frasers Centrepoint Trust is divesting Bedok Point to Frasers Property for $108.0 million. The mall had a low NPI yield of 2.5%, and the divestment will enable the REIT to recycle capital into higher yielding assets.

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