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Three of Asia’s biggest deals done in S’pore

Value of the 3 total US$1.77b, or about 20% of the Top-10 transactions

(SINGAPORE) The Top-10 real estate investment deals in Asia in the third quarter of 2007 amounted to US$9.3 billion, and three of those deals concerned Singapore properties.

A report by CB Richard Ellis (CBRE) shows that two of the Singapore deals involved stakes in One Raffles Quay while the third involved the sale of Chevron House. The total value of these deals came to US$1.77 billion or about 20 per cent of the value of the Top-10 deals.

CBRE also said that foreign investors have shown no sign of scaling back Asian real estate investment activity, ‘especially given the relative scarcity of investment grade properties’.

As a general guide, investors will look at property yields when shopping for real estate and the 4.3 per cent yield for office property here is competitive with cities like Hong Kong where the yield is 4.5 per cent.

Cities like Manila and Jakarta do offer the potential of higher yields of around 11 per cent but as CBRE executive director Jeremy Lake notes: ‘Yields reflect many factors, including risks.’

Mr Lake explains that these ‘risks’ usually include aspects of a country’s legal, political and fiscal policies.

Singapore is more likely to attract investors seeking lower risk and and perhaps lower yields, Mr Lake added.

A low-risk/low-yield dictum may not be a bad thing in volatile times.

CBRE notes that some foreign capital is being redirected to Asian property markets, seeking to benefit not merely from the natural appreciation of real estate in dynamic economies, but also from appreciation of Asian currencies against the US dollar, particularly the Chinese renminbi.

Mr Lake also pointed out that investors are drawn to markets where the cost of borrowing is lower than the property yield, explaining why Tokyo saw the largest real estate investment deals in the quarter, with the Top-three commercial real estate deals totalling US$3.95 billion.

 

Source: Business Times 4 Dec 07

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