Aug 13, 2013

Investments in Asian Hotels Strongest 1st Half since 2008

1H2013 recorded slightly more than USD1.3 bil in transactions throughout Asia, almost double 1H2012. Strong demand for investment grade hotel assets in Asia's established tourism markets of Singapore, Hong Kong and Tokyo as well as deals from emerging markets such as Thailand and the Maldives had contributed greatly to the solid growth in sales activity.
According to Jones Lang Lasalle however, the pipeline of open market listings throughout Southeast Asia is limited, even though there has been improving hotel trading performance and investor appetite. Hotel owners are generally reluctant to sell but off-market deals are still expected to continue.

Rising visitor arrivals, robust trading performance and positive market dynamics have been identified by Jones Lang as factors bringing emerging Southeast Asian markets such as Vietnam, Cambodia and Myanmar back into the investment spotlight.

Transactions in China, India and Indonesia continue to be muted due to challenging ownership structures, even as investor sentiment has improved in these markets. The Chinese market however, has seen significantly lower investment with the confirmed sales in 2013 making up only 10% of the average annual figure of USD800 mil since 2008.

Transactions in Thailand are expected to continue with strong volumes over the short term amidst political uncertainty and an unpredictable investment environment. The recent sale of Laguna Beach Resort in Phuket to Outrigger ranked among the top 5 transactions in Asia for 1H2013. Previously, the Resort had been sold to Singapore-based private equity firm Recap. The Kingdom is on track to be one of Asia's hotel investment hot spots.

Transactions in Japan has increased due to strong domestic corporate and leisure demand. Most markets have risen back to pre-quake levels.

Transactions in Singapore accounted for 44% of regional transactions for 1H2013, mainly due to Park Hotel Clarke Quay at USD238 mil. Singapore is also expected to receive another massive REIT worth more than S$2 bil in 1Q14, with a proposed REIT comprising TCC Land's Hotel InterContinental, Suites@Cairnhill and Frasers Hospitality's properties.   Cross border capital flow analysis in recent years show Singapore growing into a key source market for capital investment in hotels in the region. Japan and Singapore commanded 37% and 34% of investment flows in 1H2013.

Purchaser profile in Asia is made up of funds, institutions and large corporates restructuring their portfolios, becoming net sellers of investment grade hotels. In 1H2013, REITs, hotel operators and institutions were the most active buyers. REITs will continue to have a significant presence in Asia for the long term.

For the coming 2H2013, Jones Lang Lasalle projects hotel transaction volumes to clock another USD1 bil in Asia, slightly beating 2012's figure. Hospitality-focused REITs are now established in several Asian markets with the capability to invest offshore. The REIT law has also been passed in Thailand early 2013, allowing overseas investment.

The availability of investment grade assets in key cities and willingness of sellers to close deals via transparent processes in emerging markets will dictate the overall investment landscape. Investment will continue to be dominated by REITs, private investors, owner operaters and Private Equity.

Asian cities continue to invest in infrastructure, especially in transportation from the airports and major tourism areas. These measures are important to increase visitations and improve business confidence, which ultimately trickle down to fuel real estate investment demand.

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  1. i went to a recent luxury property fair here promoting thailand properties and the lady told me reits will start soon in Thailand.

    Is this available to singapore investors ?

  2. Hi Mr Chua,

    If I'm not wrong, there are quite a few REITS already in the Thai market, even before the REIT establishment approval in 2012, and they were in the forms of various property trusts.

    I believe if you want exposure, you can just buy the REITs from the Thai stock market as you do for Singapore REITs. There are about 40 of them, grouped under the PFUND(Property Fund)subsector. For Singaporean investors like us, we can trade Thai stocks if our brokerage offer the service. CIMB, POEMS, DBSV to name a few.

    However to apply for an IPO there would require a bank account which we would not have (unless you do). You may contact your broker to confirm the charges(fees on dividend, custodian, commission etc).


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