Pua Seck Guan on Singapore REITs

By Dees Stribling

Pua Seck Guan is CEO of CapitaLand Retail Limited and co-CEO of CapitaLand Financial Limited, a major property company in Singapore. Concurrently, he is the CEO of CapitaMall Trust Management Limited, which manages CapitaMall Trust, the first and largest listed REIT by market capitalization in Singapore with a portfolio that focuses mainly on retail properties. He is also a director of CapitaRetail China Trust Management Limited.

What advantages does Singapore have when it comes to attracting international real estate investors?
Foreign investors are already familiar with us, but more importantly, they know that Singapore is friendly to foreign investment in general, including investment in real estate in its various forms. For one thing, the country has a mature legal system, as well as a mature financial system in terms of transparency.

Singapore’s economy is propelled by the financial sector and manufacturing, and several international companies have located here to take advantage of Asian markets. That trend is going to continue, and it will drive demand for real estate. Additionally, the Singapore government is very proactive in putting policies to attract foreign investments in place.

Would foreign investors do well to look at Singapore REITs?
Singapore REITs have done well in their short existence. CapitaMall Trust is the first and largest REIT (by asset size and market capitalization) in Singapore, and five years ago, shares were 96 cents. However, now we’re at $3.90 to $4.00. In terms of market capitalization, Singapore’s REITs are collectively the largest in Asia outside of Japan, and I’d say that there’s a lot of room for expansion in holdings, both within Singapore and in other Asian countries.

Unlike the U.S., Singapore hasn’t had professional asset management until recently with the creation of REITs. Singapore real estate value hasn’t been realized because it hasn’t undergone disciplined asset management. Most of the owners or developers in Asia made money through trading, and real estate was secondary. Traditionally, there was no focus on asset management. But the concept has caught on here, and, with it, real estate value is going to grow.

How would you characterize current real estate fundamentals in Singapore?
Fundamentals have regained their strength. Office and residential markets, in particular, are at unprecedented highs in terms of rentals and occupancies. There isn’t enough supply in the short-term to meet demand.

What are some trends within the retail sector?
The retail real estate market has been quite strong recently, and will remain so. There’s a shortage of supply, but demand is being sustained by economic growth. By global standards we have one of the lowest amounts of retail space in the world per capita. The government’s policy is very conservative on retail real estate development to prevent oversupply.

Does the Singapore government implement other policies affecting the real estate industry?
Government policies promote real estate in a number of ways. For example, the government wants to attract foreign investment, otherwise we wouldn’t have a future. Tax policies promote the country as a place to establish a corporate presence. Recently, the corporate tax rate was cut two percentage points, to 18 percent, and that will encourage companies to use Singapore as a springboard into the rest of the region. That’s going to increase demand for office properties in particular.

Singapore is a small country of only 4.4 million people, and previously the government wanted to hold the line on population increase. Now, the government wants the population increased to 6.5 million eventually.