SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

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 <div class='content-caption'>Shaldine Wang </div>
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With a career spanning two decades and a swathe of industries, Shaldine Wang is always looking out for ways to push her boundaries.

The Chief Executive Officer of the manager of SGX-listed Elite Commercial REIT believes in keeping an open heart and mind when it comes to opportunities and challenges.

As Lao Tzu once said, “The journey of a thousand miles begins with a single step”, and Wang embraces this, with a glass half-full approach. “Every step you take along the way will teach you lessons – whether from failure or success – and prepare you for the next stage.”

“Don’t be afraid of the unknown – just give it a shot. You’ll never know what might come of it, and you could be pleasantly surprised,” she added.

A Bachelor of Science graduate from Canada’s University of Guelph, Wang also holds a Master of Arts in International Financial Analysis from UK’s University of Newcastle Upon Tyne.

Her career history included senior management roles with Hong Kong-listed China Huarong Energy Co Ltd, Singapore-listed Pacific Shipping Trust, which was later taken private, as well as SGX-listed Cambridge Industrial Trust, now renamed ESR-REIT.

“I’m not a single-sector veteran, and new challenges arise when you work in different industries,” Wang noted.

“When I was presented with the opportunity to move into the REIT sector with Cambridge Industrial Trust, I was filled with doubts and questions – I kept asking myself, Can I really do the job? Is this the right move?”

Wang took that leap of faith. Fast-forward 10 years, and now at the helm of Elite Commercial REIT, she has come full circle.

“Among all the sectors I’ve worked in, real estate holds a certain charm for me,” she admitted. “And in this part of the world, property is very close to our hearts – it’s an enduring asset that we want to hold for posterity.”

Listed on SGX in February this year, Elite Commercial REIT is Singapore’s first and only UK-focused real estate investment trust. Elite’s portfolio comprises 97 commercial buildings, which are primarily occupied by the Department for Work and Pensions (DWP) for job centre, back office and call centre functions. 
About 40% of its portfolio by gross rental income is situated in London, the South and the Midlands. With a long weighted average lease expiry (WALE) of 8.6 years, the portfolio is valued at about £319 million. 
 

Defensive and Stable 
 

The DWP is the UK Government’s largest public service department, responsible for crucial welfare, pensions and child maintenance services for approximately 20 million claimants. Integral to the country’s social fabric, DWP is a uniquely counter-cyclical occupier with its claimant counts, job centre footfall and benefit spending, all which are highly correlated to economic conditions.

Sponsors – who own about 20% of the REIT – comprise Elite Partners Holdings, a Singapore-based investment holding firm for Elite Partners Group, property and construction firm Ho Lee Group, and Sunway RE Capital, a wholly owned united of Malaysian conglomerate Sunway Bhd.

The REIT manager, Elite Commercial REIT Management, is 85% held by Elite Partners Holdings, in which Ho Lee Group and former Viva Industrial Trust founder Victor Song have a stake. Sunway RE Capital owns the remaining 15%.

“From the start, when we were selecting assets for Elite’s portfolio, we found that commercial assets with the UK Government as the anchor tenant were particularly attractive to investors – the risk profiles for commercial versus sovereign tenants are obviously different,” Wang recalled.

“So we decided that Elite would be the first listed REIT to offer this asset class to investors in Asia.”

Having gone asset-light since the mid-90s, the UK Government is a large occupier of real estate in the country. This bodes well for transaction volumes and activity, which adds to the market’s depth and liquidity, Wang pointed out.

Rated AA and Aa2 by ratings agencies S&amp;P Global Ratings and Moody’s respectively, the UK Government also has one of the lowest debt-to-GDP ratios among the Group of Seven countries.

Under the full repairing and insuring (triple net) leases, responsibility for asset repairs lies with the UK Government. As landlord, Elite CREIT has no repairing or insuring liability, and will not need to bear the costs of any material repairs to the properties.

There is also embedded rental growth from inflation-linked rental escalations, which would enhance the REIT’s distributions per unit (DPU). Leases include rent reviews every five years based on the UK Consumer Price Index (CPI), subject to an annual increase of 1% to 5%.

“The Bank of England has retained its medium-term CPI target of around 2% despite the impact from COVID-19,” she added.

Looking ahead, Elite CREIT will focus on both organic and inorganic opportunities to grow its assets. “As you know, we’re not a large REIT, and expanding organically at this stage can be a challenge,” she pointed out.

“But we do have a good number of under-developed land parcels in the portfolio, such as our Peel Park asset in Blackpool, which can offer asset enhancement potential over the medium term.”

A more immediate growth boost, however, can only come from acquisitions. “One source is the Right of First Refusal (ROFR) pipeline from our Sponsor,” Wang said, referring to Elite UK Commercial Fund II, a private trust managed by Elite Partners Capital that is wholly owned by Elite Partners Holdings.

The portfolio, which comprises 62 assets across the UK, with a significant number of assets located in London and the Southeast, are “low-hanging fruit” for the REIT, she added.

Elite CREIT is also sourcing suitable acquisitions through third-party agents on the ground. Its Chief Investment Officer, Jonathan Edmunds, who is from the UK, has over 17 years of experience in the real estate industry, focusing on real estate investment and management across various sectors globally.

The UK has consistently been the second-most traded real estate market worldwide, representing about 30% of all European property transactions over the last five years.

“Even during the lockdown, government-leased assets are still being transacted in the market, which signifies how well sought-after this asset class is,” Wang noted.

“And given the government’s tenant-worthy status, which defines it as a source of long-term, stable income, many investors are now turning their attention to this segment. While current market conditions may give us more leverage on price negotiations, there’s also a lot more competition for the best assets out there.”

The REIT continues to monitor the market closely. “While we do have the debt headroom to proceed with an acquisition, we do not want to jump into any transaction immediately.”

It also remains focused on a vigorous selection process, so as to cherry-pick the right assets. “The potential asset must be compelling, yield-accretive, and provide long-term cashflow to investors,” she added. 
 

Resilient and Relevant 
 

Meanwhile, challenges abound, not the least of which is COVID-19. The International Monetary Fund has forecast a significant downturn in the global economy, and the UK economy could shrink by 6.5% this year.

“While the pandemic has created many unknowns, it has also highlighted the resilience and relevance of our government-tenanted assets,” Wang pointed out.

“The office sector has been hit by declining economic growth, business closures and restrictions on movement, resulting in increased unemployment. But that has led to a massive increase in workloads for DWP staff.”

To cope with mandatory social distancing measures and altered work hours, and as employees still require access to office infrastructure to process surging jobless claims, DWP needs additional commercial space.

In terms of rent collection, the REIT has also received three months of advance rent for the period 1 April 2020 to 30 June 2020. “At this time, having the UK Government as a key tenant differentiates us from the broader commercial REIT sector. The benefits to the portfolio are clear,” she added.

Other uncertainties include the post-Brexit economic landscape. While the UK formally left the European Union at the end of January, it’s staying under the bloc’s rules until end of 2020, as the two sides try to work out a free trade deal. “The final outcome is still a question mark at this stage,” said Wang.

Nonetheless, in a post-Brexit world, DWP would continue to play a key role in the optimal functioning of society and government. “If Brexit challenges kick in, unemployment in the country could rise, which would increase demand for DWP’s services, triggering the counter-cyclical effect all over again,” she added.

While the REIT’s day-to-day operations can be all-consuming, the 48-year-old strives to maintain a good work-life balance. Chinese calligraphy helps her de-stress and regain focus. She also makes it a point not to bring work to bed.

“Remember that every day has its own challenges. It’s important to carve out time to rest, so that you’ll have a clear mind to start again – tomorrow.” Elite Commercial REIT 
 

Elite Commercial  REIT is a Singapore REIT established with the strategy of principally investing, directly or indirectly, in commercial assets and real estate-related assets in the UK. Listed on SGX on 6 Feb 2020, Elite CREIT is the first and only UK-focused listed REIT in Singapore. Its portfolio comprises 97 predominantly freehold quality commercial buildings located across the UK, with a total net internal area of approximately 2.6 million square feet and a total site area of approximately 47 hectares. The portfolio, valued at about GBP 319 million with a long weighted average lease expiry (WALE) of 8.6 years, derives over 99.0% of its gross rental income from the AA-rated UK Government. The primary occupant is the Department for Work and Pensions (DWP), the UK’s largest public service department responsible for welfare, pensions and child maintenance for about 20 million claimants.

Elite CREIT is managed by Elite Commercial REIT Management Pte Ltd, which is 85% owned by Elite Partners Holdings Pte Ltd, and 15% owned by Sunway RE Capital Pte Ltd.

The company website is: <a href="https://elitecreit.com/">elitecreit.com</a>. 
Click <a href="https://www2.sgx.com/securities/equities/MXNU">here</a> for the company's StockFacts page. 
For the Management Discussion and Analysis from 6 Feb 2020 (listing date) to 31 Mar 2020, click <a href="https://investor.elitecreit.com/newsroom/20200511_081558_MXNU_NNYX2LMQVZT8GCS6.1.pdf">here</a>. 
 

About kopi-C: the Company brew

Text: Jennifer LH Tan Photo: Company file kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations. 
For previous editions of kopi-C: the Company brew, please click <a href="http://edm.sgx.com/a/hBd-CspB86%24MfB90noBAABR54ZH/link10">here</a>.   
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to <a href="jennifer.t@sgx.com">jennifer.t@sgx.com</a>.
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    Shaldine Wang 


With a career spanning two decades and a swathe of industries, Shaldine Wang is always looking out for ways to push her boundaries.

The Chief Executive Officer of the manager of SGX-listed Elite Commercial REIT believes in keeping an open heart and mind when it comes to opportunities and challenges.

As Lao Tzu once said, “The journey of a thousand miles begins with a single step”, and Wang embraces this, with a glass half-full approach. “Every step you take along the way will teach you lessons – whether from failure or success – and prepare you for the next stage.”

“Don’t be afraid of the unknown – just give it a shot. You’ll never know what might come of it, and you could be pleasantly surprised,” she added.

A Bachelor of Science graduate from Canada’s University of Guelph, Wang also holds a Master of Arts in International Financial Analysis from UK’s University of Newcastle Upon Tyne.

Her career history included senior management roles with Hong Kong-listed China Huarong Energy Co Ltd, Singapore-listed Pacific Shipping Trust, which was later taken private, as well as SGX-listed Cambridge Industrial Trust, now renamed ESR-REIT.

“I’m not a single-sector veteran, and new challenges arise when you work in different industries,” Wang noted.

“When I was presented with the opportunity to move into the REIT sector with Cambridge Industrial Trust, I was filled with doubts and questions – I kept asking myself, Can I really do the job? Is this the right move?”

Wang took that leap of faith. Fast-forward 10 years, and now at the helm of Elite Commercial REIT, she has come full circle.

“Among all the sectors I’ve worked in, real estate holds a certain charm for me,” she admitted. “And in this part of the world, property is very close to our hearts – it’s an enduring asset that we want to hold for posterity.”

Listed on SGX in February this year, Elite Commercial REIT is Singapore’s first and only UK-focused real estate investment trust. Elite’s portfolio comprises 97 commercial buildings, which are primarily occupied by the Department for Work and Pensions (DWP) for job centre, back office and call centre functions.  
About 40% of its portfolio by gross rental income is situated in London, the South and the Midlands. With a long weighted average lease expiry (WALE) of 8.6 years, the portfolio is valued at about £319 million. 
 

Defensive and Stable 
 

The DWP is the UK Government’s largest public service department, responsible for crucial welfare, pensions and child maintenance services for approximately 20 million claimants. Integral to the country’s social fabric, DWP is a uniquely counter-cyclical occupier with its claimant counts, job centre footfall and benefit spending, all which are highly correlated to economic conditions.

Sponsors – who own about 20% of the REIT – comprise Elite Partners Holdings, a Singapore-based investment holding firm for Elite Partners Group, property and construction firm Ho Lee Group, and Sunway RE Capital, a wholly owned united of Malaysian conglomerate Sunway Bhd.

The REIT manager, Elite Commercial REIT Management, is 85% held by Elite Partners Holdings, in which Ho Lee Group and former Viva Industrial Trust founder Victor Song have a stake. Sunway RE Capital owns the remaining 15%.

“From the start, when we were selecting assets for Elite’s portfolio, we found that commercial assets with the UK Government as the anchor tenant were particularly attractive to investors – the risk profiles for commercial versus sovereign tenants are obviously different,” Wang recalled.

“So we decided that Elite would be the first listed REIT to offer this asset class to investors in Asia.”

Having gone asset-light since the mid-90s, the UK Government is a large occupier of real estate in the country. This bodes well for transaction volumes and activity, which adds to the market’s depth and liquidity, Wang pointed out.

Rated AA and Aa2 by ratings agencies S&amp;P Global Ratings and Moody’s respectively, the UK Government also has one of the lowest debt-to-GDP ratios among the Group of Seven countries.

Under the full repairing and insuring (triple net) leases, responsibility for asset repairs lies with the UK Government. As landlord, Elite CREIT has no repairing or insuring liability, and will not need to bear the costs of any material repairs to the properties.

There is also embedded rental growth from inflation-linked rental escalations, which would enhance the REIT’s distributions per unit (DPU). Leases include rent reviews every five years based on the UK Consumer Price Index (CPI), subject to an annual increase of 1% to 5%.

“The Bank of England has retained its medium-term CPI target of around 2% despite the impact from COVID-19,” she added.

Looking ahead, Elite CREIT will focus on both organic and inorganic opportunities to grow its assets. “As you know, we’re not a large REIT, and expanding organically at this stage can be a challenge,” she pointed out.

“But we do have a good number of under-developed land parcels in the portfolio, such as our Peel Park asset in Blackpool, which can offer asset enhancement potential over the medium term.”

A more immediate growth boost, however, can only come from acquisitions. “One source is the Right of First Refusal (ROFR) pipeline from our Sponsor,” Wang said, referring to Elite UK Commercial Fund II, a private trust managed by Elite Partners Capital that is wholly owned by Elite Partners Holdings.

The portfolio, which comprises 62 assets across the UK, with a significant number of assets located in London and the Southeast, are “low-hanging fruit” for the REIT, she added.

Elite CREIT is also sourcing suitable acquisitions through third-party agents on the ground. Its Chief Investment Officer, Jonathan Edmunds, who is from the UK, has over 17 years of experience in the real estate industry, focusing on real estate investment and management across various sectors globally.

The UK has consistently been the second-most traded real estate market worldwide, representing about 30% of all European property transactions over the last five years.

“Even during the lockdown, government-leased assets are still being transacted in the market, which signifies how well sought-after this asset class is,” Wang noted.

“And given the government’s tenant-worthy status, which defines it as a source of long-term, stable income, many investors are now turning their attention to this segment. While current market conditions may give us more leverage on price negotiations, there’s also a lot more competition for the best assets out there.”

The REIT continues to monitor the market closely. “While we do have the debt headroom to proceed with an acquisition, we do not want to jump into any transaction immediately.”

It also remains focused on a vigorous selection process, so as to cherry-pick the right assets. “The potential asset must be compelling, yield-accretive, and provide long-term cashflow to investors,” she added. 
 

Resilient and Relevant 
 

Meanwhile, challenges abound, not the least of which is COVID-19. The International Monetary Fund has forecast a significant downturn in the global economy, and the UK economy could shrink by 6.5% this year.

“While the pandemic has created many unknowns, it has also highlighted the resilience and relevance of our government-tenanted assets,” Wang pointed out.

“The office sector has been hit by declining economic growth, business closures and restrictions on movement, resulting in increased unemployment. But that has led to a massive increase in workloads for DWP staff.”

To cope with mandatory social distancing measures and altered work hours, and as employees still require access to office infrastructure to process surging jobless claims, DWP needs additional commercial space.

In terms of rent collection, the REIT has also received three months of advance rent for the period 1 April 2020 to 30 June 2020. “At this time, having the UK Government as a key tenant differentiates us from the broader commercial REIT sector. The benefits to the portfolio are clear,” she added.

Other uncertainties include the post-Brexit economic landscape. While the UK formally left the European Union at the end of January, it’s staying under the bloc’s rules until end of 2020, as the two sides try to work out a free trade deal. “The final outcome is still a question mark at this stage,” said Wang.

Nonetheless, in a post-Brexit world, DWP would continue to play a key role in the optimal functioning of society and government. “If Brexit challenges kick in, unemployment in the country could rise, which would increase demand for DWP’s services, triggering the counter-cyclical effect all over again,” she added.

While the REIT’s day-to-day operations can be all-consuming, the 48-year-old strives to maintain a good work-life balance. Chinese calligraphy helps her de-stress and regain focus. She also makes it a point not to bring work to bed.

“Remember that every day has its own challenges. It’s important to carve out time to rest, so that you’ll have a clear mind to start again – tomorrow.”   Elite Commercial REIT 
 

Elite Commercial  REIT is a Singapore REIT established with the strategy of principally investing, directly or indirectly, in commercial assets and real estate-related assets in the UK. Listed on SGX on 6 Feb 2020, Elite CREIT is the first and only UK-focused listed REIT in Singapore. Its portfolio comprises 97 predominantly freehold quality commercial buildings located across the UK, with a total net internal area of approximately 2.6 million square feet and a total site area of approximately 47 hectares. The portfolio, valued at about GBP 319 million with a long weighted average lease expiry (WALE) of 8.6 years, derives over 99.0% of its gross rental income from the AA-rated UK Government. The primary occupant is the Department for Work and Pensions (DWP), the UK’s largest public service department responsible for welfare, pensions and child maintenance for about 20 million claimants.

Elite CREIT is managed by Elite Commercial REIT Management Pte Ltd, which is 85% owned by Elite Partners Holdings Pte Ltd, and 15% owned by Sunway RE Capital Pte Ltd.

The company website is: elitecreit.com.  
Click here for the company's StockFacts page.  
For the Management Discussion and Analysis from 6 Feb 2020 (listing date) to 31 Mar 2020, click here.  
 

About kopi-C: the Company brew

Text: Jennifer LH Tan Photo: Company file  kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.  
For previous editions of kopi-C: the Company brew, please click here.    
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to jennifer.t@sgx.com.



Elite Commercial REIT: A Counter-Cyclical Play

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S-REITs in a Rising Interest Rate Environment

Partner, River Valley Asset Management

River Valley Asset Management

Partner

Singapore-based boutique asset management firm

River Valley Asset Management is a Singapore-based boutique asset management firm. Our team at RVAM strongly believes in being a trusted steward of our clients' wealth across generations.

Each of our fund managers has years of rich portfolio management experience over multiple market cycles at world-class investment houses. We bring our clients the combined strength of our investment team to manage their financial portfolios and to provide bespoke guidance on all aspects of their financial health.

We offer multi-asset class expert investment advice to accredited investors who are family offices, high net worth individuals and institutional investors to preserve and grow our clients' wealth.

The fund management team of the company includes Homiyar Vasania, Anand Ramachandran and Jamshed Desai.

Thematic (Sector/Industry)

As a mature economy with stable businesses, Singapore's equity benchmarks are dominated by Banks &amp; Government Linked Companies (GLC's) which have grown large over time. The large listed companies in Singapore (private as well as GLC’s) are now facing headwinds from tight labour markets resulting in rising costs and, in the absence of growth, the need to focus on raising productivity.  It is therefore not surprising that the Singapore markets do not excite the average investor. However, within this space we have been finding many hidden gems which have consistently delivered and increasingly fit the needs of a Singaporean investor looking for stable returns in a low growth environment: the REIT marketplace. Over the last seven years the REIT index has delivered over 10% p.a. annualized return which stands in stark contrast to the meagre 4% returns from benchmark STI index.

As a mature economy with stable businesses, Singapore's equity benchmarks are dominated by Banks &amp; Government Linked Companies (GLC's) which have grown large over time. The large listed companies in Singapore (private as well as GLC’s) are now facing headwinds from tight labour markets resulting in rising costs and, in the absence of growth, the need to focus on raising productivity.   It is therefore not surprising that the Singapore markets do not excite the average investor. However, within this space we have been finding many hidden gems which have consistently delivered and increasingly fit the needs of a Singaporean investor looking for stable returns in a low growth environment: the REIT marketplace. Over the last seven years the REIT index has delivered over 10% p.a. annualized return which stands in stark contrast to the meagre 4% returns from benchmark STI index.

Singapore

Viva Industrial Trust invests in real estate properties. The Company focuses on industrial properties.

Viva Industrial Trust (VIT SP)

Elite Commercial REIT: A Counter-Cyclical Play

With a career spanning two decades and a swathe of industries, Shaldine Wang is always looking out for ways to push her...

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S-REITs in a Rising Interest Rate Environment

Singapore Exchange Ltd (SGX)

Singapore - The Hidden Gems

As a mature economy with stable businesses, Singapore's equity benchmarks are dominated by Banks & Government Linked Companies (GLC's) which...

River Valley Asset Management