Help for S-REITs to respond to COVID

Full article here

In short:
1. Extension of Permissible Period for Distribution of Taxable Income
2. Higher Leverage Limit and Deferral of Interest Coverage Requirement

Is this a net positive or negative signal for REITs listed on the Singapore exchange? Prima facie looks positive, but is it indicative of significant headwinds for the industry going forward?

Let me know your views in the comments below!

Real Estate Service Providers / Consultants

Information is critical to the effective and efficient functioning of any market, and real estate is no exception. For real estate, given its unique and complex characteristics, information plays a more important tole to allow participants to better understand the market.

Bring in the Professionals

This creates a need for professional experts whose services center around:

• collecting information
• structuring information flows
• synthesising information
• help clients reduce information costs 
• match information requirements

These professional purveyors of information are none other than real estate service providers or consultants. This blog is adding to the information ecosystem as well!

Cases in point of the value add by professionals

With market knowledge about local areas and property market activities / transactions (which the lay person typically cannot easily access), the real estate agent helps to reduce client costs of searching for matching parties to close a purchase/lease transaction.
The physical aspects of real estate imply that maintenance and management by professionals would be required to ensure functionality and value preservation/enhancement

Trends to be aware of 

Tread 1: Growth and Globalization
E.g. CBRE and JLL as global companies with worldwide networks

Trend 2: Scope of Services
Expanding beyond the core services of valuation, brokerage and management to fund management, capital advisory, occupier consulting, project management and facilities management

Trend 3: Changing Client Profile
From landlords/investors to occupiers with different needs

Trend 4: Data and Technology
E.g. use of video for virtual tours
More data to incorporate into valuations

Trend 5: Complexity and scale of real estate
Sophisticated, multi use buildings, transit hubs, heritage sites

Takeaways

If you are a fellow real estate service provider, are you keeping on top of the trends? Also see Industry transformation map
If you are participating in the real estate market, are you engaging the right professional to allow you to extract optimal value for your time?

Real Estate Development in Singapore

Ever wondered about the source of wealth for the affluent in our midst?

The Forbes’ 2019 World’s Billionaires list comprised 2153 members, of which

• 306 hail from the Finance and Investment sector (e.g. Warren Buffet, Robert Smith)
• 230 from Fashion and retail (e.g. Bernard Arnault, the Waltons)
• and in third place, 223 from ... you guessed it, Real Estate! (e.g. Hui Ya Kan)

What is Real Estate Development?

But what exactly do real estate developers do? In short, they endeavour to derive the highest and best use value of a land parcel. Commercial real estate developers adopt either a "build to hold" or a "build to sell" development strategy. Prime commercial properties like office buildings and shopping malls are usually held for long term rental income purposes. "Exit" could be either be selling en bloc or strata titled sales. Alternatively, a popular option is to set up a REIT vehicles and sell the investment-grade commercial properties to affiliated REITs.

Local and Foreign Developers

Real estate development has traditionally been local in nature owing to the inherent characteristics of real estate (heterogeneous, fixed in location and capital intensive). Local developers can leverage home turf advantage like economies of scale, local knowledge/reputation to grow their market share.
Some of the major developers in Singapore include

• Capitaland
• City Developments Limited
• Far East Organisation
• Guocoland
• Keppel Land

One way of determining market share is by dividing the cumulative new unit launches by the developer over the aggregate new housing units for all developments in the market. Using non-landed residential development projects for the period 1995 to 2009, the top three are City Development Ltd + Hong Leong Group with 18.22%, followed by Far East Organisation at 16.31%, and Capitaland at 8.82%.

Some of the prominent foreign developers include

• Suntec Development Pte Ltd (Hong Kong tycoons led by Li Ka-Shing)
• Overseas Union Enterprises (Indonesia's Lippo Group)
• YTL Group (Malaysia)
• Qingjian Group, Kingsford Development and MCC Land (China)

Summary

Private real estate developers pool capital and take market risks to transform our government blueprints into reality. They buy lands via the government's sales of sites programmes, (or collective sales aka en bloc sales) then develop them into productive space for commercial users (including office, retail, hospitality, industrial); and living space for residents.

With your enhanced understanding of real estate development, how will you be leveraging that knowledge?