COVID-19 likely to hit Singapore REITs harder than financial crisis

Singapore. Photo: Guo Xin Goh

The coronavirus outbreak may hit Singapore real estate investment trusts harder than the global financial crisis did, according to Jefferies Financial Group Inc.

Singapore announced on Tuesday its strictest measures yet to combat the spread of the virus, including shutting bars and cinemas, and deferring or canceling events starting from 11:59 p.m. Thursday. Public venues such as retail malls and museums will have to ensure that groups do not exceed 10 people.

Those measures will further test investor appetite for Singapore’s REITs. With a 23% plunge, a gauge tracking them is heading for its worst quarterly drop since 2008 even though the firms offer the region’s highest yields. Unit prices have tumbled in recent weeks on mounting virus concerns and a sell-everything mentality in global markets.

The trusts have “factored in severe declines” into distribution per unit, but the impact on net operating income might be bigger than during the global financial crisis, Jefferies analyst Krishna Guha wrote in a note. “Current valuations are not even close to GFC troughs,” and the closure of public venues can last longer, the report said.

Leisure and entertainment as a tenant category accounts for an estimated 5% of gross rental income for CapitaLand Mall Trust and Frasers Centrepoint Trust, and up to 13% for Suntec Real Estate Investment Trust, the Jefferies note added.

Still, the FTSE Straits Times Real Estate Investment Trust Index jumped 9%, the most since 2009 on Wednesday, tracking a bounce in risk assets across the world on optimism about the upcoming historic stimulus package in the U.S. to stem the coronavirus.

DBS Group Holdings Ltd. analyst Derek Tan sees his estimated distribution per unit for the city-state’s retail landlords dropping by 4% to 13% for the fiscal year 2020.

The tenants’ inability to operate at full capacity can see some of them “asking for help from retail landlords in the form of rental rebates,” Tan wrote in a note.

Bloomberg

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.