3. Speaker Background
• More than 18 years in the real estate industry;
.
Corporate Visions Pte Ltd
Director - Investment Sales & Agency
B.Sc. (Estate Management) (Hons)
Work Experience : -
AIMS AMP Fund manager (formerly known as “MaCartherCook REIT”)
Ascendas : Real Estate Fund Business
Cambridge Industrial Trust : Investment
Capitaland/PREMAS : Head of Agency
Wing Tai Asia : Maketing
RCN Trainer/Module developer since 2010
Adjunct NanYang Polytechnic lecturer
Handle more than $300mn investment sales
Speciliases in Corporate real estate lease transactions, Sales & leaseback
and investment sales
Email : lester.kw@gmail.com
3
4. Agenda – Part 1
A brief history of REIT
Why Singapore REITs do well ?
Singapore Real Estate landscape
Type of real estate Funds
Source of Funds
1
2
3
4
5
5.
6. Singapore REIT Market Overview
July 2002 Sept 2002 Aug 2003 May 2004 Dec 2004 July 2005 Sept 2005 Mar/Apr 2006 July 2006
2000
MAS REITs
Guidelines
introduced
Feb 2004
Tax exemption for
individuals on
dividend from
REITs
Feb 2005
- Stamp duty waived for 5 years for
transfer of Singapore
- Foreign companies investing in
REITs to enjoy reduced withholding
tax rate
Oct 2005
Revised MAS Guidelines,
Changes in Regulation
- Partial ownership
-Gearing increased to 60%
from previous 35%
Oct 2002
Property funds
allowed for
investing into
REITS under the
CPFIS-OA
2001
Removal of Capital Tax
Gains for unit holders
who sell within 3 years
after acquisition
Currently 36 listed REIT and Business Trust (as at 2015)
7.
8. Real estate fund management
Trend of“Financialisation”Of Real Estate Market
Going forwardPreviously
9. How a REIT Work ?
AssetsAssets
Assets
Fund
Development/
Property
Management
Fees
Fund
Management/
Trustee Fees
Fund Returns
INVESTORS
10. Characteristics of a REIT
Bonds Equities
REITs
•Fixed Yield
•Downside Protection
•No Growth
•Variable Yields
•Downside Risk
•Potential Growth
•Higher Yield
•Low Volatility in Unit Price
•Low but Stable Growth
REITs offer many of the positive aspects of both bonds and equities
15. Singapore Real Estate Landscape
• A developed, mature sector broadening its regional footprint more than 21 listed
property developers (US$ 90 bn mkt cap);
• The FTSE ST Real estate index has a market capitalization of more than US$150 bn
• 3rd Largest REIT hub in Asia-Pacific after Australia and Japan; As at 2015, there are
more than 34 listed REITs and Business Trust listed in Singapore Stock Exchange with
a market capitalization of > US$66 Bn
• The Singapore Commercial and Industrial property market is dominated by REITs,
GLCs and private sector with increasing number of buildings being owned by REITS.
The Singapore government intention to promote as a hub for wealth management and
financial center.
• What are the advantages of Investing in REITS vs Real estate ?
• Tax transparency – Reits enjoy Corporate tax, GST exemption , no capital gain tax
• Lower transaction fee vs real estate transaction (GST, trading tax, broker fee, stamp
duties)
• No property management issues require
• Not subject to currency risk for Singapore assets
16. The largest REIT fund raised in
Singapore IPO - 2013
The REITs raised > S$3.4 billion (US$2.7 billion), or 68
percent, of the S$5 billion of stock sold in Singapore IPOs in
the past 12 months, according to data compiled by
Bloomberg.The biggest share sale was the S$1.6 billion
raised by Mapletree Greater China CommercialTrust
(MAGIC), a REIT that owns assets including the Festival
Walk shopping mall in Hong Kong and an office complex in
Beijing.The trust, which was also Asia’s biggest share sale this
year, surged 12 percent since its trading debut on March 7
2013.
Source : http://www.mapletree.com.sg/Media/News/2013/Mar/Copy%20of%20Mapletree%20Launches%20Fourth%20REIT-
%20First%20REIT%20with%20Commercial%20Properties%20in%20PR%20China%20and%20Hong%20Kong.aspx
18. Part of Real Estate Business Model
Core Real Estate Skills
Real Estate Domain
Knowledge + Industry
Networks + Asset Base
Financial Skills
•Origination
•Structuring
•Distribution
•Management
Create Assets Enhancing
Asset Value
Unlocking
Asset Value
REITS
Property
Funds
Advisory/
Structuring
Financial products/
services
19. Singapore Fund Structure
Private Equity Funds
Private equity real estate is an investment opportunity in which multiple
investors pool funds and invest in ownership of various real estate
properties. This type of investment is achieved when individuals make a
significant initial commitment of capital to a managed fund that scouts
out the potential real estate investments. Strategies used by these funds
vary in terms of risk involved and the types of property considered viable
for investment. One main drawback to private equity real estate for
investors is that their funds are generally frozen in the investments for
multiple years, providing little flexibility.
Mandate of fund is set out in the placement memorandum with
objectives, seed assets (if applicable), policies, investment criteria,
distribution policy, borrowing, reporting, investment committee, risks
factors, tax issues, redemption process and etc
Listed Funds – REIT / Business Trusts
Corporate governance is setout in the Trust deed; Trustee is approved
and regulated by MAS
Two common form in Singapore :REIT & Business Trusts
20. What is a Real Estate Investment Trusts (REITs)?
REITs are collective investment schemes that invest in a portfolio
of income generating real estate assets such as shopping malls,
offices, hotels or serviced apartments, usually established with a
view to generating income for unit holders.
Assets of REITs are professionally managed and net rental
income generated from assets, also known as “DPU” – Distribution
Per Unit are normally distributed at regular interval to you, as a
unit holder.
Individuals through the purchase of a publicly-traded investment
product, similar to shares of a common stock, provide dividend
income - usually from rental income and capital gains from the
profitable sale of real estate assets. It is important to know that REITs,
like other investment products,are not completely free from risk.
21. Why do Singapore REITS do well ?
* http://www.wongpartnership.com/files/download/700
Singapore has more than 60 double-tax treaty*
Good tax transparency and rules on asset sale, valuation
& Investments
MAS has clear Regulatory andTax framework on
rules governing REITS
Permissible investment by REITS and protects investors’
interest
Low interest rate environment helps
S-REIT’s assets injected are prime location, high-quality
and investment-grade
Changing dynamics of investor’s risk appetite and
developers interest in recurring cashflow business model
22. Changing Market Dynamics
Investment Demand Increasing
An ageing population will require:
returns in the form of income not
capital
capital preservation
low volatility of earnings
high transparency
liquidity
Source: Department of Statistics, Singapore
23. Changing Investor’s Risk Appetite
0% 10% 20% 30% 40%
North America
Latin
Europe
Asia
World
Percentage of total population over age 60
Aging Population
2002
2050
Investment Demand Increasing
Currently, 10% of world
population is >60. By 2050,
this will hit 21%.
Retirement/pension money
therefore increasing.
US pension fund is a USD 5
trillion market. A 1% shift in
allocation towards real
estate a USD 50 billion
demand!
24. Types of Real Estate Fund
Equity
Private Equity Funds
Hedge Funds
Real Estate Investment Trusts
Mutual Funds
Debt
Private Equity Funds
Hedge Funds
Mezzanine Funds
CMBS
• Sophisticated Investors
• Private arrangement, less
regulations
• Retail Investors
• Significant regulatory & legal
compliances
Public vs
Private
25. Types of Real Estate Funds
CORE
Target returns
7% – 10%
Typical leverage
0% – 30%
Asset profile
Income producing
Holding period
7 – 15 Years
Location
Major Metropolitan
Locations
ENHANCED
Target returns
12% – 16%
Typical leverage
40% – 60%
Asset profile
Completed with
re-positioning/
redevelopment
potential
Holding period
3 – 7 Years
Location
Undervalued market
with upside potential
OPPORTUNISTIC
Target returns
>20%
Typical leverage
>70%
Asset profile
Distressed;
Development;
Mezzanine
Holding period
2 – 4 Years
Location
Pioneer locations
with potential
Note:Figuresindicativeandsubjecttoadjustmentsforcountryand
sectorreasons
INVESTOR RISK PROFILE/ RETURNS
Source : http://www.wisegeek.com/what-is-private-equity-real-estate.htm
26. Why Asia – Stronger Economic Growth
Source :GIC
Source: Consensus Economics
4.9%
2.8%
1.7%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Asia US Europe
Average Annual GDP Growth (2011-2020)
27. More Funds Raised for Asia
Source : GIC
Global,
55%
US, 32%
Europe,
10%
Asia, 3%
Global, 53%
US, 14%
Europe, 14%
Asia,
19%
Asia,
19%
Source: PERE (Private Equity Real Estate)
Funds Raised (2006) Funds Raised (2010)
29. 10%
20%
30%
40%
50%
60%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Asia Europe Americas
Why Asia – Rise of the Middle Class
Sourc e: GIC
Source: OECD
• Size and output of middle class could be a better indicator than GDP to estimate potential size of
institutional real estate.
Share of World’s Middle Class
57.5%
30.7%
30. Types of Investors
Pension Funds
- ABP (NL), CalSTRS (US), PGGM (NL)
University Endowment Funds
- Stanford, Duke
Government Agencies
- SWF : GIC, Temasek Holdings
Insurance companies
- NTUC, Great Eastern
Corporations
- General Electric, Citigroup, Prudential (US)
Fund of Funds - Henderson fund,
franklin templeton, Russell, Swiss Reinsurance
31. GIC Real Estate
• GIC RE is one of the largest institutional investors in Asia and ranks amongst the world’s top 10 global real
estate investment firms.
• We invest both directly and indirectly across all property sectors.
Direct/ Indirect
Investments
Office
Industrial Residential Hospitality
Retail
32. GIC investment Policy
GICAsset under management : in excess of US$300 bn
Annualised 20 year return is 4% pa as at 31 Mar 2013
Source: www.gic.com
33. GIC investment policy
GIC real estate portfolio consists of :
1. Traditional private real estate – Office/hotels/retail/Industrial
2. Public equities
3. REITS and real estate debt instruments
35. WestQuay Shopping Centre,
Southampton, UK
Westin Paris, FranceOpernturm, Frankfurt
Kingshuset, Stockholm, Sweden
Merrill Lynch Financial
Centre, London, UK
Bluewater Shopping Centre, UK
36.
37. Global Source of Funding
Local ► Global play
Increasing interest in cross border
transactions
Ability to tap onto global capital
Platform to access third party income
to expand
39. Agenda – Part 2
Deals agents can work with the REIT
REIT framework
Investment by REIT
Fee Structure of a REIT
REIT vs Business Trust
1
2
3
4
5
40. Transactions Agents can work with the REITs
Sales & Lease back transactions (“SLB”)
Leasing deals for tenants (anchor or sub-
tenants)
Divestment/Sale of assets (end of headlease)
Head lease structure or Build-to-suit projects
Relocation of tenants when leases are due for
expiry
Broker deals/sites with re-development/BTS
potential; Maximise plot ratio, re-zoning,
change of use, etc…
41. Investment Deal Structure (Industrial transaction)
• Sale & Leaseback or Income Support - 3 to 15 years
• En-bloc or more than 51% of MCST
• Deal size - > $10mn - $ 500 mn
• Triple Net Yield : 7.0% - 8%
Criteria
Price – Structural deal with option for renewal or natural lease assignment
Location – near Expressway; major transport hub; circulation space for cargos
Credit standing of Tenants/seller – listed vs non-listed companies
Possibility of sub-division for mutli-tenancy or Strata unit sales
Land tenure of property – at least 30 years remaining
Building Specifications – warehouse; self storage; high-tech; Datacentre, etc…
Condition precedent – technical, financial and legal due diligence
JTC/HDB OR relevant authorities land sale/assignment guidelines
53. Investment in S-Reits
May invest in real estate (freehold, leasehold, inside and outside of
Singapore and related assets)
Assets includes : listed and unlisted debt securities and listed shares
issues by property corporations, mortgage-backed securities and other
property funds and assets incidental to the ownership of the real estate
May also invest through direct ownership, or through a shareholding in
unlisted special purpose vehicles which holds or own the real estate
Source : MAS
54. Typical fees to a REIT manager
Acquisition fee: 1% of property value
Divestment fee : 0.5% of property value
Development fee : 3% of project value
New leases : 1 month for every 3 year lease; 2 month for 5 year
lease
Renewal fee : 1 month for every 5 year lease
Property management fee : 2% of gross revenue
Reimbursement of property manager costs, advertising fee,
project management fee and related staff training fee.
Source : MAS OPERA http://masnet.mas.gov.sg/opera/sdrprosp.nsf
55.
56.
57. MAS changes in REIT guidelines
• Singapore, 28 September 2007...The Monetary Authority of
Singapore (MAS) has issued revised Property Fund Guidelines
(REIT Guidelines) (PDF, 332KB). The revised Guidelines are
intended to improve safeguards for investors and to provide
greater clarity and flexibility for commercial transactions. The
Guidelines have also been rationalised to reduce compliance costs
in a number of areas.
• The changes include:
a. Enhancing the disclosure requirements on the use of short-term
yield-enhancing arrangements;
b. Providing guidance on permissible fixed-term management
contracts;
Source : MAS http://www.mas.gov.sg/news-and-publications/media-releases/2007/mas-issues-
revised-property-fund-guidelines.aspx
58. MAS Changes to REIT Guidelines
• Disallowing discounts to institutional investors for subscriptions made
at the time of listing of a REIT;
• Specifying safeguards for REITs that intend to pay dividends in excess
of current income;
• Requiring a REIT to invest at least 75% of its assets in income-
producing real estate; and
• Removing the 5% single party limit for investments in real-estate
related securities.
Source : MAS
59.
60. Latest JTC guidelines on 3rd Party Facility Providers (“3PL”)
(wef 15th Nov 2013)
Source :JTC
62. Ascendas’ Fund Management
Ascendas Real Estate InvestmentTrust (A-REIT) was launched on 19 November
2002
Singapore’s first business space trust
Started with eight properties which has grown to 106 properties (as at 2015)
Listed at S$0.88, now trading in the range of S$2.40 - $2.60 in 2015
Listed with market capitalization of S$0.48 billion, now is > S$6.0 billion (as at
2015)
Ascendas-MGM Funds Management Ltd
60%40%
63.
64. Business Trust
A BusinessTrust is a trust that runs and operates a business enterprise.
Registered business trusts must have a trustee-manager whose role is
to safeguard the interests of beneficiaries (referred to as‘unitholders’
under the BusinessTrusts Act) of the trust and to manage the business
of the trust.
The framework to regulate business trusts activities and the
responsibilities of a trustee-manager can be found under the Business
Trusts Act.
In Singapore, the business trust model is a vehicle that has the potential
to help monetise infrastructure asset investments, and also get public
funding into risk-contained infrastructure assets.
MAS : http://www.mas.gov.sg/regulations-and-financial-stability/regulations-guidance-and-licensing/business-
trusts/list-of-registered-business-trusts.aspx
65. Business trust
Introduced by the MonetaryAuthority of Singapore in 2004
Singapore business trust is an investment vehicle structured so that a single
company, known as the "trustee-manager",holds and operates business
enterprises for the benefit of its investors, beneficiaries who are unit holders
Investors do not have any operational control or shareholders' rights, they benefit
from the steady dividend stream.
The trustee-manager is also professionally managed, and reports to the board
which comprises primarily independent directors.
Fiduciary responsibility to beneficiaries is placed squarely on a single trustee-
manager.
For investors, projects are often highly attractive investments. Besides often good
returns, they offer, perhaps more importantly, stable returns.
At a time when bank deposits rates offer less than one per cent in interest, business
trusts are generating returns of between 5 and 8 per cent.This profile is also
appealing for its potential ability to tap the huge pool of long-term savings residing
in pension funds acrossAsia and the world.
66.
67. Ascendas India Business Trust
Ascendas IndianTrust (a-iTrust) was launched on 1Aug 2007
Singapore’s first listed Indian property trust
Seeded with four world-class IT parks in India
Listed at S$1.18, currently at S$1.63 on 9 Nov 2007
Current market capitalization of > S$1.10 billion, in excess of S$3.5
billion
The V
ITPB
Cyber Pearl
ITPC
68.
69. REITS vs Business Trust
REITS
(CMT, CCT)
BusinessTrusts
(shipping trust, a-iTRUST)
Quarterly reporting and dividends
distribution
Semi-annually
Tax transparency
(as along as 90% of income are distributed
to unitholders)
Liable for income tax
Independence ofTrustee and manager Trustee and manager can be same party
Trustee act as a check and balance to the
unit-holders
Trustee and manager carries heavier
responsibilities to unit-holders
MAS guideline on gearing limit : 60% Gearing limit is determine by manager
70. Conclusion
A new business model : - Separating ownership from management (not
just a means of financing)
Different way of doing business : - Organizational changes needed
Effectively managing the shareholders’ interest and returns
- Active lease and asset management
- Structured & Tax-efficient asset arrangement
Opportunities :
- Act as fund manager (fund/ trustee management fees, acquisition/ divestment
fees, fund-raising, project management and etc…)
- Act as asset manager (property re-development/project management fees,
A&A projects, Asset enhancement and etc fees)
- An opportunity to acquire regional assets - Not limited to local market size
71. CONCLUSION …
Not the “latest fashion”, but here to stay
Very much a Real Estate business model
Competitors realize it, moving fast – regional player and local players
(Mapletree – office, retail and industrial/logistic,Ascendas – hotel
and Business Space, ARA/CWT, SPH)
Challenges
Internally - organizational change, biggest challenge
Externally - competitors, may overtake us
Bottom-line
This business has a customer – International & Institutional investors
The need for change is to reduce Income volatility and meet new demand for a
financial real estate asset
72. Q & A Session
&
Please assist to fill up and handover the evaluation form and
collect your certificate of attendance
73. C
A
A
A to Zs of Real Estate Fund Phraseology
Asset Under Management (AUM) : Total Open Market Value of assets that are
invested under the Fund.
Acquisition / Divestment Fee : The fee, which the Fund Manager charges, for
any property invested or divested by the Fund,
usually a % of acquisition cost / divestment
proceeds.
Carried Interest : Interest payable to the Fund Manager if Fund performance
meets certain pre-defined target. Usually a % of the returns in
excess of a pre-determined IRR.
74. A to Zs of Real Estate Fund Phraseology
Clawback : Provision for the Fund Manager to return all or part of the Carried
Interest (or performance fees or Shareholders’ Excess Return)
previously earned to the investors, should the ultimate aggregate
return of the Fund falls below a pre-defined target.
Committed Capital: Total amount subscribed for and committed by Investors at
the Closing Date of the Fund.
Closing Date : The date that the subscription period for the sale of units /
shares pursuant to the private placement of the Fund closes.C
C
C
75. I
I
F
A to Zs of Real Estate Fund Phraseology
Investment Committee : A committee that makes key decisions for the Fund, such
as acquisition, divestment, etc, and also to monitor the
performance of the Fund Manager. Usually formed by
reps from the Sponsor, Fund Manager and major
investors.
Investment Criteria : The set of criteria / restrictions that is put in place to
determine the type and profile of assets / projects that the
Fund may acquire or invest in.
Fund Management Fee : The fee that the Fund pays to the Fund Manager
at regular intervals (either quarterly, half-yearly or
yearly) for managing the Fund.
76. I
L
M
A to Zs of Real Estate Fund Phraseology
Minimum Subscription : The minimum sum, which an investor of the Fund, would
need to commit to invest into the Fund.
Leverage Internal Rate of Return : Tthe leveraged internal compound rate of return,
being that annual discount rate which, when
applied to a set of cash flows after financing,
produces a net present value of those cash
flows equal to zero.
Investment Period : A pre-defined period, commencing from the closing of the
Fund, that allows new acquisitions for the Fund.
77. S
P
P
A to Zs of Real Estate Fund Phraseology
Special Purpose Vehicles :A body corporate or other entity used by the Fund
as an investment vehicle to own real estate, which
is held by the Fund either directly or indirectly
through intermediary entities. Sometimes also
known as Portfolio Companies or Intermediate
Holding Companies.
Preferred Return : A pre-defined level of return for the Fund, which is usually
used as the trigger point for rewarding the Fund Manager
with additional performance fee / carried interest.
Pipeline :Refers to projects and acquisitions, which have been identified by
the Fund, for injection into the Fund at the opportune time.
78. S
S
S
A to Zs of Real Estate Fund Phraseology
Subscription Agreement : The subscription agreement to be entered into by
the Fund and an Investor relating to the
subscription for Shares or units in the Fund
Sponsor’s Commitment : The amount of equity, which the Sponsor has
committed to invest in the Fund. This is usually
done to show alignment of interest between the
Sponsor and the investors of the Fund.
Sponsor’s Excess Profit Share: Additional profit to be distributed to the Sponsor in
consideration of the Sponsor agreeing to transfer
the Seed Investment to the Fund and directing
investment opportunities available to the Sponsor
to the Fund. Could be triggered by a pre-defined
Preferred Return.
79. S
T
T
A to Zs of Real Estate Fund Phraseology
Target Fund Size : The maximum amount of committed capital that Fund
targets to achieve.
Term of Fund : The period from the closing of the Fund to the termination
of the Fund life. Usually extendable with investors’
consent.
Seed Investment : Refers to the asset / project, which the Sponsor injected
into the Fund prior to the closing of the Fund