Singapore investors buy record US$26.3b of overseas properties in 2015


JLL's Mr Hyland says London is still a key market, but investors may find better value in properties in continental Europe.

Singapore - Singapore-based investors purchased a record US$26.31 billion (S$37.83 billion) in overseas real estate in 2015, up 49 per cent from US$17.63 billion in 2014, going by preliminary data compiled by real-estate data and analytics firm Real Capital Analytics (RCA) as at Jan 12.

The increase reflects Singapore investors' strategy of targeting the world's most liquid markets to diversify and grow their portfolios in the low-interest-rate environment.

Last year's record level of deals was boosted by big-ticket purchases by heavyweights such as GIC and Global Logistic Properties (GLP); however, mid-sized and smaller property purchases were also made by Singapore developers and family offices increasingly turning overseas in the face of a dour outlook for real estate at home, with the imposition of property cooling measures.

RCA's numbers may be updated as more transactions come to light.

Globally, Singapore ranked as the fourth-largest cross-border property investor in 2015, the same as in 2014.

US buyers were the most active in 2015, pouring US$58.74 billion in capital outside their borders; they were followed by their counterparts in Canada (US$32.17 billion) and Hong Kong (US$31.44 billion). China was in fifth position, at US$23.35 billion.

Marc Giuffrida, executive director of global capital markets (Asia) at CBRE, said it was not surprising that Singapore-based investors emerged the fourth largest cross-border investors of real estate: "Singapore is a relatively small country, but has a relatively large wealth pool to invest - not just sovereign wealth, but corporates, families and private wealth. So there are only so many opportunities for them to put that money to work in Singapore."

The overseas property investment brigade from Singapore last year was led by bigwigs GIC, GLP, Temasek Holdings, Mapletree, ARA Asset Management Group and Ascendas Real Estate Investment Trust.

RCA's database covers only transactions above US$10 million in various asset classes, including development sites, office, industrial, retail, apartment, hotel and serviced apartments.

The US$26.31 billion that Singapore investors ploughed into overseas real estate last year was six times the US$4.24 billion figure for 2009, when central banks embarked on the first round of quantitative easing, noted Petra Blazkova, senior director of analytics for the Asia-Pacific at RCA.

The firm's analysis also showed that the US$26.31 billion comprised 126 completed transactions, compared with 139 deals in 2014 and 26 in 2009. RCA also noted that there were 68 Singapore-based investors active overseas in 2015, almost double the 33 five years ago.

Ms Blazkova said: "As more Singaporean investors look abroad to diversify a growing pool of domestic wealth, they have been drawn to offshore opportunities in real-estate markets that offer stable fundamentals, regulatory support and market transparency."

Historically, Singapore investors have been interested in the familiar Chinese property market. It was the top destination for Singaporean capital, attracting about US$25.87 billion of investment from 2009 to 2015. The next most popular destination was the US, which drew US$20.29 billion from the island-state's investors during the same period, followed by Australia (US$15.35 billion), the UK (US$10.80 billion) and Japan (nearly US$7.1 billion).

For 2015 itself, the US was the top investment destination for Singapore investors in search of overseas property; the US$14.76 billion they invested there was boosted by mega acquisitions by the likes of GIC and GLP in the industrial property sector. This resulted in industrial property being the most sought-after property class overseas among Singapore investors, drawing US$13.92 billion last year.

A joint venture between GLP and GIC purchased Blackstone's Indcor portfolio of 117 million sq ft across the US for slightly over US$8 billion; GLP also paid US$4.52 billion for a portfolio of industrial properties in the US which it acquired from Industrial Income Trust.

In Australia, Ascendas Real Estate Investment Trust picked up a portfolio of 26 logistics properties for A$1.01 billion from GIC and Frasers Property Australia.

Office and retail property remained popular among Singapore investors; they bought US$5.45 billion worth of office property and US$3.15 billion in retail property overseas last year.

Of note was GIC's purchase of a US retail portfolio comprising five malls from Macerich, said RCA.

While Singapore's overseas property investments have expanded over the past few years, the inflow of foreign capital into the Singapore property market remained stable at US$3.51 billion last year. This was in line with most of the previous years, with the exception of 2014, when the figure fell to US$1.22 billion.

Ms Blazkova said: "Chinese investors maintained their lead as the largest source of foreign capital investing in Singapore property, accounting for US$1.03 billion of properties and development sites purchased in 2015.

"That said, one of the largest sales of Singapore property to a foreign entity also took place in 2015, when a development site in Paya Lebar was acquired for total of US$1.28 billion by a joint venture between Abu Dhabi's sovereign wealth fund Abu Dhabi Investment Authority and the Australian developer Lend Lease."

Apart from this transaction, China's MCC (China Metallurgical) and Hao Yuan Investment group were the most active foreign investors in Singapore's real estate market last year.

Ms Blazkova noted that between 2011 and last year, the preferred route for foreign investors looking to access real estate in Singapore was by purchasing a development site. During the period, they picked up almost US$8 billion of development sites, accounting for 58 per cent of inward investment into Singapore real estate.

Market watchers said this is partly due to the ease and transparency of the tender process when it comes to buying land at state tenders as well as a dearth of completed investment-grade properties available for sale, as most owners are long-term holders. Moreover, profit margins from property development are typically higher than rental yields.

Mr Giuffrida of CBRE highlighted a recent trend of more transactions in the lower price bracket of, say, below US$100 million. This segment is starting to attract keen interest from smaller developers, family offices and private wealth on the lookout for opportunities, particularly for yield plays.

For this year, he predicts two key trends for global cross-border property investments:

The first is heightened interest in smaller-ticket deals from Asian investors, including Singaporean investors. The second trend is that more investors will move outside core locations. "In the Australian context, if they were previously looking at downtown CBD office buildings, now they are prepared to look at city-fringe locations.

"In Europe, they might have previously focused on Central London office buildings, development sites and hotels; now they are looking at regional UK and branching into continental Europe."

Greg Hyland, head of capital markets, Singapore at JLL, said: "London is still a very important market, but there is an element of caution because of price appreciation; so investors may see better value in continental Europe - for example, Germany, Portugal, Italy, Spain and France."

This article was first published on Jan 20, 2016.
Get The Business Times for more stories.

Become a fan on Facebook