Asian property owners plan to sell shares in as many as 15 real estate investment trusts (Reits) within the coming year, according to Michael Smith, head of Asian real estate investment banking at Goldman Sachs Group Inc.
Jakarta-based Lippo Group will sell as much as $5 billion (Rs20,500 crore) of assets to new property trusts, chief executive officer James Riady had said on 24 June. India’s Embassy Group, whose buildings house Hewlett-Packard Co.’s offices, plans an initial public offering (IPO) in Singapore. Goldman Sachs and UBS AG are advising on the issue. “There is huge capital flow coming into the Asian real estate market,” Smith said.
Property owners are using Reits to raise cash amid soaring investor demand for real estate, which has offered twice the average return of stocks. Reits raise money from equity investors to buy properties from shopping malls to business parks. They are usually required by law to pay most of their profit as dividends.
Morgan Stanley’s high-return real estate funds have posted average annual gains of more than 20% since 1991, about twice the annual returns for the Standard & Poor’s 500 Index. New money for property investments is coming from the public REIT market, big developers in China and India, and private equity funds, including those raised by the investment banks, Smith said.
The biggest real estate investor among investment banks, Morgan Stanley had said on 20 June that it raised $8 billion in the world’s largest property fund that will invest about half in Japan and 25% in countries, including China and India.
Funds, including Reits, may raise a record $69 billion globally this year, according to Private Equity Intelligence Ltd. Goldman Sachs this month drew $4.07 billion for a property fund, twice as much as originally sought.
Asia’s real estate trust market, with 100 listed Reits, will undergo a period of consolidation, Smith added.