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)

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Equity Bottom-Up

Manulife US REIT (MUST) / Equity Bottom-Up

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SGX lists eight actively traded S-Reits with properties in the United States (US). Five out of the eight S-Reits have pure exposure to the US and among them are three US office S-Reits. 
The US Centres for Disease Control and Prevention (CDC) on May 13 announced that fully vaccinated individuals do not need to wear masks outdoors and can avoid wearing masks indoors in most places, and updated that life can begin to return to normal despite caution issued by the World Health Organization (WHO).

Nonetheless, US Office S-Reits remain sanguine about companies' return-to-office plans and are adapting to agile and "new normal" arrangements as the US continues to push for normalcy and re-opening of sectors and industries. 
The three US Office S-Reits trade at an average price-to-book ratio of 0.98 times and average 7.8 per cent in distribution yield. All of the three have average committed occupancy rates of over 90 per cent, above the average Class A US office average of 84 per cent, and have weighted average lease expiry (WALE) that range from 4.3 to 5.3 years. 
Manulife US Reit (MUST), which has an occupancy rate of 92 per cent, has observed more tenants gradually returning to the office with May 2021's portfolio physical occupancy at 20.0 per cent, versus 13.3 per cent seen in Jan 2021. The Reit notes that offices continue to remain relevant as companies adopt a hybrid model and the majority of employers do require the same if not more office space post Covid-19, driven by the demand for rising headcount and social distancing needs.

MUST sees post-Covid-19 themes such as the acceleration of population and company migration to magnet cities, growing tech sector, strong demand for health care, and fast developing knowledge economy to provide uplift for the Reit. MUST has a focus to target magnet cities which are defined as having attributes such as growing tech tenants, population growth, business friendly and lower costs of living.

Prime US Reit (Prime) sees interest in its assets pick up as tenants make longer-term leasing decisions, despite the current low physical occupancy. Its current portfolio occupancy rate is at 91.7 per cent. Some of its tenants which include Goldman Sachs and Wells Fargo have also made plans for employees to return to the office by July 2021.

In securing new leases, Prime notes that its new tenants are largely from diverse established and technology sectors. The Reit observes that the US office transaction market has shown signs of activity in recent weeks and it is actively exploring acquisition opportunities in its target markets.

Keppel Pacific Oak US Reit (KORE) has a 91.6 per cent portfolio committed occupancy rate and believes that the rollout of vaccines and removal of restrictions is raising confidence and optimism. LaSalle Network's Office Re-Entry Index shows that 70 per cent of CEOs, human resources and finance leaders are planning for employees to return to the office by fall 2021.

KORE has a focus in markets with exposure to technology hubs and tech-tenancy. Its recent leasing activities are driven mainly by demand from professional services, finance and insurance, and technology. Over 37 per cent of its current portfolio by net lettable area comprises tenants from technology and medical and healthcare.  REIT Watch is a weekly column on The Business Times, <a href="https://www.businesstimes.com.sg/companies-markets/us-office-s-reits-half-empty-or-half-full">read</a> the original version.
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    8 SREIT with exposes to US assets


SGX lists eight actively traded S-Reits with properties in the United States (US). Five out of the eight S-Reits have pure exposure to the US and among them are three US office S-Reits.  
The US Centres for Disease Control and Prevention (CDC) on May 13 announced that fully vaccinated individuals do not need to wear masks outdoors and can avoid wearing masks indoors in most places, and updated that life can begin to return to normal despite caution issued by the World Health Organization (WHO).

Nonetheless, US Office S-Reits remain sanguine about companies' return-to-office plans and are adapting to agile and "new normal" arrangements as the US continues to push for normalcy and re-opening of sectors and industries.  
The three US Office S-Reits trade at an average price-to-book ratio of 0.98 times and average 7.8 per cent in distribution yield. All of the three have average committed occupancy rates of over 90 per cent, above the average Class A US office average of 84 per cent, and have weighted average lease expiry (WALE) that range from 4.3 to 5.3 years.  
Manulife US Reit (MUST), which has an occupancy rate of 92 per cent, has observed more tenants gradually returning to the office with May 2021's portfolio physical occupancy at 20.0 per cent, versus 13.3 per cent seen in Jan 2021. The Reit notes that offices continue to remain relevant as companies adopt a hybrid model and the majority of employers do require the same if not more office space post Covid-19, driven by the demand for rising headcount and social distancing needs.

MUST sees post-Covid-19 themes such as the acceleration of population and company migration to magnet cities, growing tech sector, strong demand for health care, and fast developing knowledge economy to provide uplift for the Reit. MUST has a focus to target magnet cities which are defined as having attributes such as growing tech tenants, population growth, business friendly and lower costs of living.

Prime US Reit (Prime) sees interest in its assets pick up as tenants make longer-term leasing decisions, despite the current low physical occupancy. Its current portfolio occupancy rate is at 91.7 per cent. Some of its tenants which include Goldman Sachs and Wells Fargo have also made plans for employees to return to the office by July 2021.

In securing new leases, Prime notes that its new tenants are largely from diverse established and technology sectors. The Reit observes that the US office transaction market has shown signs of activity in recent weeks and it is actively exploring acquisition opportunities in its target markets.

Keppel Pacific Oak US Reit (KORE) has a 91.6 per cent portfolio committed occupancy rate and believes that the rollout of vaccines and removal of restrictions is raising confidence and optimism. LaSalle Network's Office Re-Entry Index shows that 70 per cent of CEOs, human resources and finance leaders are planning for employees to return to the office by fall 2021.

KORE has a focus in markets with exposure to technology hubs and tech-tenancy. Its recent leasing activities are driven mainly by demand from professional services, finance and insurance, and technology. Over 37 per cent of its current portfolio by net lettable area comprises tenants from technology and medical and healthcare.   REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - US office S-Reits - half empty or half full?

ARA US Hospitality Trust / Equity Bottom-Up

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WITHIN Singapore's Reits &amp; Property Trusts (S-Reits) that are listed for trading, there are five (ARA US Hospitality Trust, Manulife US Reit, Prime US Reit, United Hampshire US Reit, Keppel Pacific Oak US Reit) with 100 per cent of assets located in the US and three (IReit Global, Cromwell European Reit, Elite Commercial Reit) with 100 per cent of their assets in Europe.

These eight S-Reits have an average distribution yield of 7.5 per cent and generated positive average total returns of 8.9 per cent in the 2021 year-to-date till May 12.

In the past week, Cromwell European Reit (CE Reit), Manulife US Reit (MUST) and United Hampshire US Reit (UHU Reit) published their business/operational updates for the first quarter of 2021. Common outlook expectations revolved around the recovery of economic activities in 2021 as vaccination roll-outs progress, restrictions ease, daily activities resume and employment data rebound.

With most of Europe still under tight restrictions during the quarter, GDP for the eurozone economy fell by 0.6 per cent quarter-on-quarter, based on preliminary data released by Europe's statistics office Eurostat. CE Reit noted that, barring a further deterioration of the current Covid-19 situation, the eurozone's 2021 GDP growth is projected at 4.1 per cent (according to Oxford Economics). 
CE Reit's gross revenue and net property income (NPI) declined marginally by 0.1 per cent and 0.4 per cent, respectively for Q1 FY2021. This was attributed to prolonged Covid-19 lockdowns in most of CE Reit's countries of operations. However, the Reit believes that there will be higher demand for light industrial /logistics space as e-commerce continues to expand in 2021, supplemented by further demand coming from the reconfiguration and expansion of supply chains so as to be better prepared for future disruptions and consumer demand shocks. In March 2021, CE Reit completed the acquisition of 11 modern logistics assets in Czech Republic and Slovakia. The Reit aims to increase exposure to logistics to 50 per cent of portfolio asset under management (AUM), up from the current 38 per cent. 
In contrast to Europe's GDP contraction in the Q1 2021, the US reported a quarter-on-quarter GDP growth of 1.6 per cent. Both MUST and UHU Reit noted that the GDP rebound indicates momentum coupled with improving unemployment rate, fast-paced vaccination roll-out and two rounds of federal stimulus payments.

In its Q1 FY2021 operational update, MUST reported strong lease renewals (93.6 per cent of leases by NLA) but minimal new leases as prospective tenants continue to stay cautious. Looking forward, MUST expects post Covid-19 themes such as the acceleration of population and company migration, growing technology sector, strong demand for healthcare and fast developing knowledge economy to provide uplift to the Reit. MUST intends to target cities that are business-friendly, have growing technology and healthcare industries as well as robust population growth.

Compared to IPO forecasts, UHU Reit's Q1 FY2021 distributable income was up 1.3 per cent while gross revenue and NPI were down 1.9 per cent and 1.8 per cent respectively. UHU Reit noted that, according to the National Retail Federation (NRF), US retail sales are expected to grow between 6.5 per cent and 8.2 per cent in 2021, underpinned by healthy consumer fundamentals, pent-up demand and widespread vaccination. This was evident in the new and renewal leases signed this quarter, most of which were food &amp; beverage and consumer services tenants.

The Reit also expects trends such as increase in consumer awareness of the benefits of self-storage, an increasingly mobile population and the decluttering of homes to create more efficient workspaces to continue even as the country transitions to a post-Covid environment. REIT Watch is a weekly column on The Business Times,<a href="https://www.businesstimes.com.sg/companies-markets/china-poised-to-drive-economic-growth"> </a><a href="https://www.businesstimes.com.sg/companies-markets/western-s-reits-sanguine-on-post-covid-outlook">read</a><a href="https://www.businesstimes.com.sg/companies-markets/bulk-of-s-reits-in-key-global-real-estate-indices"> </a>the original version.
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    REIT watch


WITHIN Singapore's Reits &amp; Property Trusts (S-Reits) that are listed for trading, there are five (ARA US Hospitality Trust, Manulife US Reit, Prime US Reit, United Hampshire US Reit, Keppel Pacific Oak US Reit) with 100 per cent of assets located in the US and three (IReit Global, Cromwell European Reit, Elite Commercial Reit) with 100 per cent of their assets in Europe.

These eight S-Reits have an average distribution yield of 7.5 per cent and generated positive average total returns of 8.9 per cent in the 2021 year-to-date till May 12.

In the past week, Cromwell European Reit (CE Reit), Manulife US Reit (MUST) and United Hampshire US Reit (UHU Reit) published their business/operational updates for the first quarter of 2021. Common outlook expectations revolved around the recovery of economic activities in 2021 as vaccination roll-outs progress, restrictions ease, daily activities resume and employment data rebound.

With most of Europe still under tight restrictions during the quarter, GDP for the eurozone economy fell by 0.6 per cent quarter-on-quarter, based on preliminary data released by Europe's statistics office Eurostat. CE Reit noted that, barring a further deterioration of the current Covid-19 situation, the eurozone's 2021 GDP growth is projected at 4.1 per cent (according to Oxford Economics).  
CE Reit's gross revenue and net property income (NPI) declined marginally by 0.1 per cent and 0.4 per cent, respectively for Q1 FY2021. This was attributed to prolonged Covid-19 lockdowns in most of CE Reit's countries of operations. However, the Reit believes that there will be higher demand for light industrial /logistics space as e-commerce continues to expand in 2021, supplemented by further demand coming from the reconfiguration and expansion of supply chains so as to be better prepared for future disruptions and consumer demand shocks. In March 2021, CE Reit completed the acquisition of 11 modern logistics assets in Czech Republic and Slovakia. The Reit aims to increase exposure to logistics to 50 per cent of portfolio asset under management (AUM), up from the current 38 per cent.  
In contrast to Europe's GDP contraction in the Q1 2021, the US reported a quarter-on-quarter GDP growth of 1.6 per cent. Both MUST and UHU Reit noted that the GDP rebound indicates momentum coupled with improving unemployment rate, fast-paced vaccination roll-out and two rounds of federal stimulus payments.

In its Q1 FY2021 operational update, MUST reported strong lease renewals (93.6 per cent of leases by NLA) but minimal new leases as prospective tenants continue to stay cautious. Looking forward, MUST expects post Covid-19 themes such as the acceleration of population and company migration, growing technology sector, strong demand for healthcare and fast developing knowledge economy to provide uplift to the Reit. MUST intends to target cities that are business-friendly, have growing technology and healthcare industries as well as robust population growth.

Compared to IPO forecasts, UHU Reit's Q1 FY2021 distributable income was up 1.3 per cent while gross revenue and NPI were down 1.9 per cent and 1.8 per cent respectively. UHU Reit noted that, according to the National Retail Federation (NRF), US retail sales are expected to grow between 6.5 per cent and 8.2 per cent in 2021, underpinned by healthy consumer fundamentals, pent-up demand and widespread vaccination. This was evident in the new and renewal leases signed this quarter, most of which were food &amp; beverage and consumer services tenants.

The Reit also expects trends such as increase in consumer awareness of the benefits of self-storage, an increasingly mobile population and the decluttering of homes to create more efficient workspaces to continue even as the country transitions to a post-Covid environment.  REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - Western S-Reits sanguine on post-Covid outlook

Research from SooChow CSSD Capital Markets (Asia), SCCM Asia Research

SCCM Asia Research

Research from SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

<h2>Singapore</h2><h3>SREITs results in a glance (see detailed spreadsheet and calendar attached)</h3><table class="table table-striped"><tbody><tr><td style="width: 167.45pt;"> </td><td style="width: 129.85pt;">CERT (€)</td><td style="width: 117.6pt;">MUST (US$)</td><td style="width: 117.6pt;">KORE (US$)</td></tr><tr><td style="width: 167.45pt;">Period</td><td style="width: 129.85pt;">1Q21</td><td style="width: 117.6pt;">1Q21</td><td style="width: 117.6pt;">1Q21</td></tr><tr><td style="width: 167.45pt;">Gross Revenue (S$ m)</td><td style="width: 129.85pt;">48.5 (-0.1% YoY)</td><td style="width: 117.6pt;">NA</td><td style="width: 117.6pt;">34.6 (-2.1% YoY)</td></tr><tr><td style="width: 167.45pt;">NPI (S$ m)</td><td style="width: 129.85pt;">30.8 (-0.4% YoY)</td><td style="width: 117.6pt;">NA</td><td style="width: 117.6pt;">20.4 (-2.8% YoY)</td></tr><tr><td style="width: 167.45pt;">DPU (S$ c)</td><td style="width: 129.85pt;">0.827 (-9.1% YoY)</td><td style="width: 117.6pt;">NA</td><td style="width: 117.6pt;">Not Disclosed</td></tr><tr><td style="width: 167.45pt;">NAV per Unit (S$)</td><td style="width: 129.85pt;">2.445</td><td style="width: 117.6pt;">0.730</td><td style="width: 117.6pt;">Not Disclosed</td></tr><tr><td style="width: 167.45pt;">P/B (x)</td><td style="width: 129.85pt;">0.978</td><td style="width: 117.6pt;">1.030 (Based on 4Q20 NAV)</td><td style="width: 117.6pt;">0.90 (Based on 4Q20 NAV)</td></tr><tr><td style="width: 167.45pt;">Occupancy (%)</td><td style="width: 129.85pt;">94.6</td><td style="width: 117.6pt;">92.0</td><td style="width: 117.6pt;">91.6</td></tr><tr><td style="width: 167.45pt;">Reversion (%)</td><td style="width: 129.85pt;">-1.3</td><td style="width: 117.6pt;">2.1</td><td style="width: 117.6pt;">5.7</td></tr><tr><td style="width: 167.45pt;">Gearing (%)</td><td style="width: 129.85pt;">38.5</td><td style="width: 117.6pt;">41.3</td><td style="width: 117.6pt;">37.5</td></tr><tr><td style="width: 167.45pt;">Cost of Debt (%)</td><td style="width: 129.85pt;">1.72</td><td style="width: 117.6pt;">3.18</td><td style="width: 117.6pt;">2.82</td></tr><tr><td style="width: 167.45pt;">1 Yr Fwd Yield (%)</td><td style="width: 129.85pt;">7.95</td><td style="width: 117.6pt;">8.00</td><td style="width: 117.6pt;">8.3</td></tr><tr><td style="width: 167.45pt;">Debt Hedged (%)</td><td style="width: 129.85pt;">100</td><td style="width: 117.6pt;">NA</td><td style="width: 117.6pt;">84.7</td></tr><tr><td style="width: 167.45pt;">Target Price</td><td style="width: 129.85pt;">NA</td><td style="width: 117.6pt;">NA</td><td style="width: 117.6pt;">NA</td></tr><tr><td style="width: 167.45pt;">Rating</td><td style="width: 129.85pt;">NA</td><td style="width: 117.6pt;">NA</td><td style="width: 117.6pt;">NA</td></tr></tbody></table><h3><a href="https://www.smartkarma.com/entities/cromwell-european-real-estate" target="_blank" data-smartkarma-citation="entities:25889" rel="noopener">Cromwell European REIT (CERT SP)</a> 1Q21 Business Update – Weakening operational metrics with negative reversions and falling occupancies</h3><ul><li>1Q21 revenue and NPI decreased by 0.1% and 0.4% YoY, respectively, to €48.5m (28.4% BB est) and €30.8m. Prolonged COVID-19 lockdowns impacted 1Q21 gross revenue and NPI, notably reducing carpark income in the mixed-use Central Plaza in Rotterdam, the Netherlands and resulting in some vacancy in certain light industrial/logistics assets in France and Denmark. The disposal of 12 higher-yielding and higher-risk assets in the Netherlands, France and Denmark also affected gross revenue, though this was partially offset by new income from recently completed acquisitions in Italy, Germany, the Czech Republic and Slovakia</li><li>1Q21 DPU decreased 9.1% YoY to €0.827c (21.8% BB est). This due to the same factors impacting DI as well as the timing of the investment of the €100m private placement proceeds to offset the additional weighted average units on issue in Mar21. 1Q21 DI was €21.7m, 6.5% lower YoY, due to the same factors affecting gross revenue and NPI. It was further impacted by €0.8m of higher interest expenses from the €500m longer-tenured bond issuances and certain one-off trust expenses of €0.4m</li><li>Overall portfolio occupancy decreased slightly to 94.6% in 1Q21 (vs. 95.1% in 4Q20 and 94.3% in 3Q20), mainly due to vacancies in office assets in France and Finland and the departure of an anchor tenant-customer (Nilfisk), which relocated its operations to Belgium from the Priorparken 700 / 800 asset in Copenhagen, Denmark. CERT recorded 37 new leases and 21 renewals for 19,735sqm and 13,428sqm of space, respectively. Portfolio WALE stood at 4.8 years. Rental reversions came in at -1.3% in 1Q21 (vs +2.1% in 4Q20 and +2.8% in 3Q20)</li><li>Office – Occupancy of 94.5% (vs 95.1% in 4Q20 and 94.9% in 3Q20). CERT recorded 9 new leases and 7 renewals for 1,180sqm and 2,189sqm of space, respectively. 34% tenant retention rate, 21% of expiries and breaks up to 30Sep21 have been de-risked. Office WALE stood at 4.4 years. Rental reversions came in at -1.0% in 1Q21 (vs +1.7% in 4Q20 and -1.4% in 3Q20)   </li><li>Industrial/logistics – Occupancy of 93.8% (vs 94.1% in 4Q20 and 92.3% in 3Q20). CERT recorded 28 new leases and 13 renewals for 18,556sqm and 10,381sqm of space, respectively. 26% tenant retention rate, 79% of expiries and breaks up to 30Sep21 have been de-risked. Industrial WALE stood at 4.8 years. Rental reversions came in at +1.5% in 1Q21 (vs +3.8% in 4Q20 and +14.4% in 3Q20)   </li><li>Portfolio gearing stands at 38.5% (vs. 38.1% in 4Q20 and 35.9% in 3Q20) with average cost of debt of 1.72% pa. (vs. 1.66% in 4Q20 and 1.5% in 3Q20) with 100% of debt hedged. CERT maintained a strong cash position of €75.8m</li><li>CERT currently trades at 7.95% FY21E yield and 0.978x P/B.</li></ul><h3><a href="https://www.smartkarma.com/entities/manulife-us-reit" target="_blank" data-smartkarma-citation="entities:567" rel="noopener">Manulife US REIT (MUST SP)</a> 1Q21 Business Updates – US office market remains muted, mitigated by limited supply and expiry in MUST’s markets</h3><ul><li>Revenue, NPI and DI were not disclosed in 1Q21</li><li>Overall portfolio occupancy dipped further to 92.0% in 1Q21 (vs. 93.4% in 4Q20 and 94.3% in 3Q20), but is still above the US Class-A average of ~82%</li><li>MUST signed 270,000sqft (~5.8% of NLA) of leases in 1Q21 with +2.1% rental reversions (vs. +0.1% in full-year FY20 and +7.9% in 9M20). These leases are mainly from renewals (93.6%), followed by expansion (5.3%) and new leases (1.1%), supported by finance and insurance, administrative, advertising and legal sectors. It has a long WALE of 5.3 years with ~4.4% (by GRI) or 4.3% (by NLA) of leases up for renewal for the remaining of FY21E. Nonetheless, its current portfolio has a 2.1% in-place rental escalations. Given limited supply in MUST’s markets over the next 12 months, these markets is expected to see a 2.5% rent growth, in line with the overall US average</li><li>Tenants’ collection rate remains healthy (98% collection), but challenges for 2021 include: 1) Low physical occupancy at 5-25% (low carpark income), and 2) existing vacancies remain a challenge to fill (larger space takes longer to fill and it’s still a tenant’s market with higher incentive and rent free)</li><li>Portfolio gearing stands at 41.3% (vs. 41.0% in 4Q20 and 39.9% in 3Q20) with average cost of debt of 3.18% pa. (vs. 3.18% in 4Q20 and 3.21% in 3Q20). In Apr21, MUST has refinanced its loans due FY21E at lower interest rate, bringing weighted average interest rate to 3.0% and increasing weighted average debt maturity to 3.4 years</li><li>MUST currently trades at 8.00% FY21E yield and 1.03x P/B. </li></ul><figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=03e35791bb&amp;attid=0.0.3&amp;permmsgid=msg-f:1699422834728702566&amp;th=1795901073311266&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ8sEKl6WDAe8N9__qHKBNe6-08vbrc8QfHwJamRBTAaR_dON_UK1yOULc7lIYoAqOLnG1bIt-bZRfkFUmsv6mNgGuwGup4IAMyZuiuu1S3HH7pcwGFiu6yseig&amp;disp=emb" width="403" height="199" class="editor-image img-responsive" data-image-whitelisted=""></figure><figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=03e35791bb&amp;attid=0.0.4&amp;permmsgid=msg-f:1699422834728702566&amp;th=1795901073311266&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ_0APJf80bwv3E2S_EiRYN8qcm-reP1OQ2z06j7ZbYooytHl5IJJso0tnZEZ2wCt-YWmA-nXxQk1VnMuNtz5DfMAf0FyvFj2bW9VWWOmPzOeJvwjpGsNdafsus&amp;disp=emb" width="364" height="196" class="editor-image img-responsive" data-image-whitelisted=""></figure><h3><a href="https://www.smartkarma.com/entities/propnex-ltd" target="_blank" data-smartkarma-citation="entities:27209" rel="noopener">Propnex Ltd (PROP SP)</a> 1Q21 PATMI almost doubled to S$16.2m; Debt free balance sheet  </h3>PROP reported a 96.7% YoY growth in net profit after tax for 1Q21 to S$16.2m(vs S$8.2m in 1Q20), on the back of a 63.3% YoY growth in revenue to S$220.6m (vs S$135.1m in 1Q20). The performance was driven by higher number of transactions completed in 1Q21 following the recovery of private residential market from the property cooling measures in Jul18. Revenue growth was mainly driven due to the increase in commission income from agency services of ~S$47.5m and increase in project marketing services of ~S$38.0m. The results translate to an EPS growth of 95.6% YoY to S$4.01c in 1Q21. PROP remained debt free, and its balance sheet remained robust with cash and cash equivalents of S$118.9m as at 31Mar21, compared to S$105.8m as at 31Dec20. PROP has also taken 70% interest in Ovvy, The People Marketplace, a technology platform that connects service providers to consumers.<h3><a href="https://www.smartkarma.com/entities/lh-group-ltd" target="_blank" data-smartkarma-citation="entities:4397" rel="noopener">Pacific Star Development (PSTAR SP)</a> 3Q21 net loss increases, identified uncertainty over operating as going concern</h3>PSTAR, whose management is voicing uncertainty over its ability to operate as a going concern, sank further into the red in 3Q21. Net loss widened to S$8.2m as revenue came in 81% YoY lower at S$674,000 due to lower number of Puteri Cove Residences units sold. Gross profit plunged 90% YoY to S$56,000. The group booked an increase of S$1.28m in other expenses largely due to an increase in trade receivables written off as a result of cancellation of sales and purchase agreements for Puteri Cove Residences units. Loss per share was S$1.64c, higher than S$1.6c the year before. As at 31Mar, the group's net liability position was S$69.3m. PSTAR said there is uncertainty as to whether the group is able to meet its contractual obligations in the next 12 months as and when they fall due, and hence there is uncertainty over its ability to operate as a going concern for the next 12 months.

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached) CERT (€)MUST (US$)KORE (US$)Period1Q211Q211Q21Gross Revenue (S$ m)48.5 (-0.1% YoY)NA34.6 (-2.1% YoY)NPI (S$ m)30.8 (-0.4% YoY)NA20.4 (-2.8% YoY)DPU (S$ c)0.827 (-9.1% YoY)NANot DisclosedNAV per Unit (S$)2.4450.730Not DisclosedP/B (x)0.9781.030 (Based on 4Q20 NAV)0.90 (Based on 4Q20 NAV)Occupancy (%)94.692.091.6Reversion (%)-1.32.15.7Gearing (%)38.541.337.5Cost of Debt (%)1.723.182.821 Yr Fwd Yield (%)7.958.008.3Debt Hedged (%)100NA84.7Target PriceNANANARatingNANANACromwell European REIT (CERT SP) 1Q21 Business Update – Weakening operational metrics with negative reversions and falling occupancies1Q21 revenue and NPI decreased by 0.1% and 0.4% YoY, respectively, to €48.5m (28.4% BB est) and €30.8m. Prolonged COVID-19 lockdowns impacted 1Q21 gross revenue and NPI, notably reducing carpark income in the mixed-use Central Plaza in Rotterdam, the Netherlands and resulting in some vacancy in certain light industrial/logistics assets in France and Denmark. The disposal of 12 higher-yielding and higher-risk assets in the Netherlands, France and Denmark also affected gross revenue, though this was partially offset by new income from recently completed acquisitions in Italy, Germany, the Czech Republic and Slovakia1Q21 DPU decreased 9.1% YoY to €0.827c (21.8% BB est). This due to the same factors impacting DI as well as the timing of the investment of the €100m private placement proceeds to offset the additional weighted average units on issue in Mar21. 1Q21 DI was €21.7m, 6.5% lower YoY, due to the same factors affecting gross revenue and NPI. It was further impacted by €0.8m of higher interest expenses from the €500m longer-tenured bond issuances and certain one-off trust expenses of €0.4mOverall portfolio occupancy decreased slightly to 94.6% in 1Q21 (vs. 95.1% in 4Q20 and 94.3% in 3Q20), mainly due to vacancies in office assets in France and Finland and the departure of an anchor tenant-customer (Nilfisk), which relocated its operations to Belgium from the Priorparken 700 / 800 asset in Copenhagen, Denmark. CERT recorded 37 new leases and 21 renewals for 19,735sqm and 13,428sqm of space, respectively. Portfolio WALE stood at 4.8 years. Rental reversions came in at -1.3% in 1Q21 (vs +2.1% in 4Q20 and +2.8% in 3Q20)Office – Occupancy of 94.5% (vs 95.1% in 4Q20 and 94.9% in 3Q20). CERT recorded 9 new leases and 7 renewals for 1,180sqm and 2,189sqm of space, respectively. 34% tenant retention rate, 21% of expiries and breaks up to 30Sep21 have been de-risked. Office WALE stood at 4.4 years. Rental reversions came in at -1.0% in 1Q21 (vs +1.7% in 4Q20 and -1.4% in 3Q20)   Industrial/logistics – Occupancy of 93.8% (vs 94.1% in 4Q20 and 92.3% in 3Q20). CERT recorded 28 new leases and 13 renewals for 18,556sqm and 10,381sqm of space, respectively. 26% tenant retention rate, 79% of expiries and breaks up to 30Sep21 have been de-risked. Industrial WALE stood at 4.8 years. Rental reversions came in at +1.5% in 1Q21 (vs +3.8% in 4Q20 and +14.4% in 3Q20)   Portfolio gearing stands at 38.5% (vs. 38.1% in 4Q20 and 35.9% in 3Q20) with average cost of debt of 1.72% pa. (vs. 1.66% in 4Q20 and 1.5% in 3Q20) with 100% of debt hedged. CERT maintained a strong cash position of €75.8mCERT currently trades at 7.95% FY21E yield and 0.978x P/B.Manulife US REIT (MUST SP) 1Q21 Business Updates – US office market remains muted, mitigated by limited supply and expiry in MUST’s marketsRevenue, NPI and DI were not disclosed in 1Q21Overall portfolio occupancy dipped further to 92.0% in 1Q21 (vs. 93.4% in 4Q20 and 94.3% in 3Q20), but is still above the US Class-A average of ~82%MUST signed 270,000sqft (~5.8% of NLA) of leases in 1Q21 with +2.1% rental reversions (vs. +0.1% in full-year FY20 and +7.9% in 9M20). These leases are mainly from renewals (93.6%), followed by expansion (5.3%) and new leases (1.1%), supported by finance and insurance, administrative, advertising and legal sectors. It has a long WALE of 5.3 years with ~4.4% (by GRI) or 4.3% (by NLA) of leases up for renewal for the remaining of FY21E. Nonetheless, its current portfolio has a 2.1% in-place rental escalations. Given limited supply in MUST’s markets over the next 12 months, these markets is expected to see a 2.5% rent growth, in line with the overall US averageTenants’ collection rate remains healthy (98% collection), but challenges for 2021 include: 1) Low physical occupancy at 5-25% (low carpark income), and 2) existing vacancies remain a challenge to fill (larger space takes longer to fill and it’s still a tenant’s market with higher incentive and rent free)Portfolio gearing stands at 41.3% (vs. 41.0% in 4Q20 and 39.9% in 3Q20) with average cost of debt of 3.18% pa. (vs. 3.18% in 4Q20 and 3.21% in 3Q20). In Apr21, MUST has refinanced its loans due FY21E at lower interest rate, bringing weighted average interest rate to 3.0% and increasing weighted average debt maturity to 3.4 yearsMUST currently trades at 8.00% FY21E yield and 1.03x P/B. Propnex Ltd (PROP SP) 1Q21 PATMI almost doubled to S$16.2m; Debt free balance sheet  PROP reported a 96.7% YoY growth in net profit after tax for 1Q21 to S$16.2m(vs S$8.2m in 1Q20), on the back of a 63.3% YoY growth in revenue to S$220.6m (vs S$135.1m in 1Q20). The performance was driven by higher number of transactions completed in 1Q21 following the recovery of private residential market from the property cooling measures in Jul18. Revenue growth was mainly driven due to the increase in commission income from agency services of ~S$47.5m and increase in project marketing services of ~S$38.0m. The results translate to an EPS growth of 95.6% YoY to S$4.01c in 1Q21. PROP remained debt free, and its balance sheet remained robust with cash and cash equivalents of S$118.9m as at 31Mar21, compared to S$105.8m as at 31Dec20. PROP has also taken 70% interest in Ovvy, The People Marketplace, a technology platform that connects service providers to consumers.Pacific Star Development (PSTAR SP) 3Q21 net loss increases, identified uncertainty over operating as going concernPSTAR, whose management is voicing uncertainty over its ability to operate as a going concern, sank further into the red in 3Q21. Net loss widened to S$8.2m as revenue came in 81% YoY lower at S$674,000 due to lower number of Puteri Cove Residences units sold. Gross profit plunged 90% YoY to S$56,000. The group booked an increase of S$1.28m in other expenses largely due to an increase in trade receivables written off as a result of cancellation of sales and purchase agreements for Puteri Cove Residences units. Loss per share was S$1.64c, higher than S$1.6c the year before. As at 31Mar, the group's net liability position was S$69.3m. PSTAR said there is uncertainty as to whether the group is able to meet its contractual obligations in the next 12 months as and when they fall due, and hence there is uncertainty over its ability to operate as a going concern for the next 12 months.

ASEAN Builder's Scoop (11May21) - CERT weakening operational metrics

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 <img src='https://api2.sgx.com/sites/default/files/2021-04/59569c39-f94b-452b-a90f-6dc19d117ac3%281%29.PNG' alt='Global Benchmark' />
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 <div class='content-caption'>Global Benchmark</div>
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THE FTSE EPRA Nareit Global Real Estate Index Series, designed to represent general trends in eligible real estate equities worldwide, is a widely followed global benchmark with an estimated US$340 billion of assets under management actively benchmarked or passively tracking the indices.

The indexes are built by FTSE Russell, together with the European Public Real Estate Association (EPRA) and the National Association of Real Estate Investment Trusts (Nareit).

A company is eligible if it derives at least 75 per cent of Ebitda from relevant real estate activities, including ownership, trading and development of income-producing real estate. Other criteria include its size as well as liquidity.

As of end 2020, there are 23 SGX-listed real estate related equities in the index series, which includes 19 S-Reits and property trusts. These 19 trusts have a combined market capitalisation of over S$90 billion, representing close to 80 per cent of the S-Reits and property trust sector in Singapore. They generated an average 5.3 per cent total returns in year-to-date (YTD) 2021 till April 15, reversing an average decline of 4.3 per cent total returns in 2020.

The two recent additions to the index series include Ascott Residence Trust, in June 2020, and Parkway Life Reit, in September 2020. Five S-Reits (Frasers Logistics &amp; Commercial Trust, Frasers Centrepoint Trust, Keppel DC Reit, Manulife US Reit and Sasseur Reit) entered the index series back in 2019.

Ascott Residence Trust (ART), the largest hospitality trust listed on the SGX, has an asset value of S$7.2 billion as at Dec 31, 2020 with properties in 38 cities worldwide. Given Covid-19 headwinds in the hospitality industry, ART's FY2020 gross profit declined 41 per cent to S$149.6 million. However, the trust manager noted that its properties with a larger proportion of long stays in markets such as China and Vietnam have outperformed other markets that are dependent on transient travellers. It also believes that there is significant pent-up demand for travel and that domestic, leisure and free independent segments are expected to continue to lead the recovery.

Recently, to enhance the stability of its portfolio, ART expanded its investment mandate to include student accommodation. The trust noted that student accommodation is one of the most resilient real estate asset classes and has maintained high occupancy during the Covid-19 situation in the US. ART's first acquisition of a purpose-built student accommodation asset in the US was completed in February 2021 for US$95 million. The asset, Signature West Midtown, is a freehold property with 525 beds across 183 units located in the heart of Atlanta, Georgia.

ParkwayLife Reit (PLife Reit), the largest healthcare-focused S-Reit, has a diversified portfolio of 54 properties with a total asset value of approximately S$2.02 billion as at Dec 31, 2020. It owns a portfolio of private hospitals in Singapore comprising Mount Elizabeth Hospital, Gleneagles Hospital and Parkway East Hospital. PLife Reit, which generated total returns of 21 per cent, was one of the best performing S-Reits in 2020 and continued to generate positive returns of 7.1 per cent in 2021 YTD.

PLife Reit's FY2020 net property income increased by 4.0 per cent year-on-year, which translated to a 4.5 per cent increment in its distribution per unit across the same period.

The Reit attributed its ability to deliver stable distributions to its strong capital structure.

During FY2020, PLife Reit successfully refinanced all its maturing debts due in 2021, with no debt refinancing requirement till 2022. It believes that the healthcare industry will continue to remain essential in the long run driven by a rapidly ageing population and a greater demand for better quality healthcare and global aged care services. 

REIT Watch is a weekly column on The Business Times, <a href="https://www.businesstimes.com.sg/companies-markets/s-reits-under-s1b-lead-sector-in-q1-2021">read</a><a href="https://www.businesstimes.com.sg/companies-markets/bulk-of-s-reits-in-key-global-real-estate-indices"> </a>the original version.
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    Global Benchmark


THE FTSE EPRA Nareit Global Real Estate Index Series, designed to represent general trends in eligible real estate equities worldwide, is a widely followed global benchmark with an estimated US$340 billion of assets under management actively benchmarked or passively tracking the indices.

The indexes are built by FTSE Russell, together with the European Public Real Estate Association (EPRA) and the National Association of Real Estate Investment Trusts (Nareit).

A company is eligible if it derives at least 75 per cent of Ebitda from relevant real estate activities, including ownership, trading and development of income-producing real estate. Other criteria include its size as well as liquidity.

As of end 2020, there are 23 SGX-listed real estate related equities in the index series, which includes 19 S-Reits and property trusts. These 19 trusts have a combined market capitalisation of over S$90 billion, representing close to 80 per cent of the S-Reits and property trust sector in Singapore. They generated an average 5.3 per cent total returns in year-to-date (YTD) 2021 till April 15, reversing an average decline of 4.3 per cent total returns in 2020.

The two recent additions to the index series include Ascott Residence Trust, in June 2020, and Parkway Life Reit, in September 2020. Five S-Reits (Frasers Logistics &amp; Commercial Trust, Frasers Centrepoint Trust, Keppel DC Reit, Manulife US Reit and Sasseur Reit) entered the index series back in 2019.

Ascott Residence Trust (ART), the largest hospitality trust listed on the SGX, has an asset value of S$7.2 billion as at Dec 31, 2020 with properties in 38 cities worldwide. Given Covid-19 headwinds in the hospitality industry, ART's FY2020 gross profit declined 41 per cent to S$149.6 million. However, the trust manager noted that its properties with a larger proportion of long stays in markets such as China and Vietnam have outperformed other markets that are dependent on transient travellers. It also believes that there is significant pent-up demand for travel and that domestic, leisure and free independent segments are expected to continue to lead the recovery.

Recently, to enhance the stability of its portfolio, ART expanded its investment mandate to include student accommodation. The trust noted that student accommodation is one of the most resilient real estate asset classes and has maintained high occupancy during the Covid-19 situation in the US. ART's first acquisition of a purpose-built student accommodation asset in the US was completed in February 2021 for US$95 million. The asset, Signature West Midtown, is a freehold property with 525 beds across 183 units located in the heart of Atlanta, Georgia.

ParkwayLife Reit (PLife Reit), the largest healthcare-focused S-Reit, has a diversified portfolio of 54 properties with a total asset value of approximately S$2.02 billion as at Dec 31, 2020. It owns a portfolio of private hospitals in Singapore comprising Mount Elizabeth Hospital, Gleneagles Hospital and Parkway East Hospital. PLife Reit, which generated total returns of 21 per cent, was one of the best performing S-Reits in 2020 and continued to generate positive returns of 7.1 per cent in 2021 YTD.

PLife Reit's FY2020 net property income increased by 4.0 per cent year-on-year, which translated to a 4.5 per cent increment in its distribution per unit across the same period.

The Reit attributed its ability to deliver stable distributions to its strong capital structure.

During FY2020, PLife Reit successfully refinanced all its maturing debts due in 2021, with no debt refinancing requirement till 2022. It believes that the healthcare industry will continue to remain essential in the long run driven by a rapidly ageing population and a greater demand for better quality healthcare and global aged care services. 

REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - Bulk of S-Reits in key global real estate indices

Frasers Commercial Trust / Equity Bottom-Up

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<li>
The rise of sustainable finance saw global sustainable debt issuance surpass US$700 billion in 2020. Investor focus on sustainable debt has expanded in recent years to include instruments such as sustainability-linked and social bonds, as well as green and sustainable-linked loans. While green or sustainability linked loan opens more avenues of funding, it also serves as a signal to investors on the firm’s commitment towards environment and sustainable business practices. 
	 </li>
	<li>
S-REITs and Property Trusts secured new or refinanced green and/or sustainability-linked loans since the start of 2020, totaling more than S$2 billion in loan, of which close to 54% are green loans and rest are sustainability-linked loans. 
	 </li>
	<li>In 2021, Far East Hospitality Trust, Manulife US REIT, Mapletree Logistics Trust, Mapletree North Asia Commercial Trust and Ascott Residence Trust have all secured green or sustainability-linked loans. Proceeds are mostly used to finance general working capital or green certified properties. </li>
</ul>
 

In 2020, global sustainable debt issuance surpassed US$700 billion, up from US$566 billion in 2019 (according to Bloomberg). The notion of sustainable debt, which started off with an initial focus on green bonds, has evolved tremendously in the last few years. The scope of sustainable debt has expanded to include instruments such as sustainability-linked and social bonds, as well as green and sustainable-linked loans.
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 <img src='https://api2.sgx.com/sites/default/files/2021-03/Capture_11.PNG' alt='Global Sustainable Debt Issuance' />
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 <div class='content-caption'>Global Sustainable Debt Issuance</div>
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To encourage corporates to adopt sustainable business practices, provide them with access to green financing and anchor deep green finance expertise in Singapore, the Monetary Authority of Singapore (“MAS”) introduced a new Green and Sustainability-Linked Loan Grant Scheme (“GSLS”), effective since January 2021. The first of its kind globally, the GSLS supports corporates of all sizes to obtain green and sustainable financing by defraying the expenses of engaging independent sustainability advisory and assessment service providers to validate the green and sustainability credentials of the loan (click <a href="https://www.mas.gov.sg/schemes-and-initiatives/green-and-sustainability-linked-loans-grant">here</a> for more information on the GSLS).  
 

<ul>
<li>
Green loans are generally structured in the same way as standard loans except that proceeds from green loans are tracked and used for specific green projects which met certain benchmarked criteria.</li>
	<li>
Sustainability-linked loans generally do not restrict the use of proceeds but borrowers will have to commit to sustainability performance targets, and are awarded a reduction in interest rates if their sustainability targets are met. Therefore, sustainability-linked loans align companies to broad investor sustainability expectations and allow access to a wider range of companies who might not have specific green projects or funding needs. 
	 </li>
</ul>
While green or sustainability linked loan opens more avenues of funding, it also serves as a signal to investors on the firm’s commitment towards environment and sustainable business practices. 
As many as 12 Singapore REITs and Property Trusts have secured new or refinanced their green and/or sustainability-linked loans since the start of 2020 to 30 March 2021. Together, the 12 S-REITs obtained more than S$2 billion in loan amount, of which close to 54% are in the form of green loans while the other 46% are sustainability-linked loans. Recent green and sustainability-linked loans by Singapore REITs and Property Trust 
In March 2021, <a href="https://www.sgx.com/securities/equities/BTOU">Manulife US REIT</a> (“MUST”) obtained its first sustainability-linked loan of US$250 million from DBS and OCBC. Loan terms incorporate interest rate reductions linked to the achievement of predetermined sustainability performance targets, including efficient use of energy and water, and management of greenhouse gas (GHG) emissions, in relation to MUST’s nine office properties in the U.S. Back in May 2020, MUST also obtained its maiden green loan of US$100 million of which proceeds will be primarily used to refinance Peachtree, a 27-storey Class A office building located in Midtown, Atlanta. <a href="https://www.sgx.com/securities/equities/HMN">Ascott Residence Trust</a> (“ART”) also secured its maiden green loan in January 2021. The S$50 million five-year green loan from DBS made ART the first hospitality trust in Singapore to secure a green loan. ART noted that proceeds from the green loan will be used to finance its maiden development project and co-living property, lyf one-north Singapore. lyf one-north Singapore is one of ART’s 15 properties that attained green certifications in 2020, bringing the total number of ART’s green properties to 21. 
All four of Mapletree-sponsored REITs have existing green and/or sustainability-linked loans. More recently, in 2021, both <a href="https://www.sgx.com/securities/equities/M44U">Mapletree Logistics Trust</a> (“MLT”) and <a href="https://www.sgx.com/securities/equities/RW0U">Mapletree North Asia Commercial Trust</a> (“MNACT”) have secured new green loan facilities while <a href="https://www.sgx.com/securities/equities/ME8U">Mapletree Industrial Trust</a> (“MIT”) obtained its inaugural S$300 million sustainability-linked loan back in December 2020. <a href="https://www.sgx.com/securities/equities/N2IU">Mapletree Commercial Trust</a> (“MCT”) entered into a green loan facility in June 2020 to refinance loans relating to MCT’s properties which have been certified BCA Green Mark Gold or better. This follows MCT’s first S$670 million green loan in 2019 to part finance its acquisition of Mapletree Business City (Phase 2). List of Singapore REITs and Property Trusts with new Green and/or Sustainability-linked loans since Jan 2020

<table class="table table-striped"><tbody>
<tr>
<td>
			Name
			</td>
			<td>
			Code
			</td>
			<td>
			Loan Types
			</td>
			<td>
			Aggregated Loan Amount
			</td>
			<td>
			Mkt Cap S$M
			</td>
			<td>
			Dividend Yield (%)
			</td>
		</tr>
<tr>
<td>
			Ascott Residence Trust
			</td>
			<td>
			HMN
			</td>
			<td>
			Green Loan
			</td>
			<td>
			S$50m
			</td>
			<td>
			3,363
			</td>
			<td>
			2.8%
			</td>
		</tr>
<tr>
<td>
			CapitaLand Integrated Commercial Trust
			</td>
			<td>
			C38U
			</td>
			<td>
			Sustainability-linked1
			</td>
			<td>
			S$200m
			</td>
			<td>
			13,853
			</td>
			<td>
			5.4%
			</td>
		</tr>
<tr>
<td>
			Far East Hospitality Trust
			</td>
			<td>
			Q5T
			</td>
			<td>
			Sustainability-linked
			</td>
			<td>
			S$125m
			</td>
			<td>
			1,237
			</td>
			<td>
			5.3%
			</td>
		</tr>
<tr>
<td>
			Frasers Industrial and Commercial Trust
			</td>
			<td>
			BUOU
			</td>
			<td>
			Sustainability-linked2
			</td>
			<td>
			S$100m
			</td>
			<td>
			4,903
			</td>
			<td>
			4.8%
			</td>
		</tr>
<tr>
<td>
			Keppel REIT
			</td>
			<td>
			K71U
			</td>
			<td>
			Green Loan
			</td>
			<td>
			A$300m
			</td>
			<td>
			4,505
			</td>
			<td>
			3.1%
			</td>
		</tr>
<tr>
<td>
			Manulife US REIT
			</td>
			<td>
			BTOU
			</td>
			<td>
			Sustainability-linked &amp; Green Loan
			</td>
			<td>
			US$350m
			</td>
			<td>
			1,553
			</td>
			<td>
			7.6%
			</td>
		</tr>
<tr>
<td>
			Mapletree Commercial Trust
			</td>
			<td>
			N2IU
			</td>
			<td>
			Green Loan
			</td>
			<td>
			Not Available3
			</td>
			<td>
			6,997
			</td>
			<td>
			3.9%
			</td>
		</tr>
<tr>
<td>
			Mapletree Industrial Trust
			</td>
			<td>
			ME8U
			</td>
			<td>
			Sustainability-linked
			</td>
			<td>
			S$300m
			</td>
			<td>
			6,442
			</td>
			<td>
			4.4%
			</td>
		</tr>
<tr>
<td>
			Mapletree Logistics Trust
			</td>
			<td>
			M44U
			</td>
			<td>
			Green Loan
			</td>
			<td>
			S$200m4
			</td>
			<td>
			8,267
			</td>
			<td>
			4.1%
			</td>
		</tr>
<tr>
<td>
			Mapletree North Asia Commercial Trust
			</td>
			<td>
			RW0U
			</td>
			<td>
			Green Loan
			</td>
			<td>
			Not Available3
			</td>
			<td>
			3,503
			</td>
			<td>
			7.0%
			</td>
		</tr>
<tr>
<td>
			Soilbuild Business Space REIT
			</td>
			<td>
			SV3U
			</td>
			<td>
			Green Loan
			</td>
			<td>
			S$80m
			</td>
			<td>
			683
			</td>
			<td>
			7.3%
			</td>
		</tr>
<tr>
<td>
			Suntec REIT
			</td>
			<td>
			T82U
			</td>
			<td>
			Green Loan
			</td>
			<td>
			A$450m
			</td>
			<td>
			4,455
			</td>
			<td>
			4.7%
			</td>
		</tr>
</tbody></table>
 1Loan made under CapitaLand Mall Trust before merger

2Loan made under Frasers Commercial Trust before merger

3Actual loan amount not disclosed

4Two new green loans made during the period, loan amount unavailable for most recent loan in Mar 2021

Source: Company Announcements, Bloomberg (Data as of 30 Mar 2021)
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The rise of sustainable finance saw global sustainable debt issuance surpass US$700 billion in 2020. Investor focus on sustainable debt has expanded in recent years to include instruments such as sustainability-linked and social bonds, as well as green and sustainable-linked loans. While green or sustainability linked loan opens more avenues of funding, it also serves as a signal to investors on the firm’s commitment towards environment and sustainable business practices. 
	 
	
S-REITs and Property Trusts secured new or refinanced green and/or sustainability-linked loans since the start of 2020, totaling more than S$2 billion in loan, of which close to 54% are green loans and rest are sustainability-linked loans.  
	 
	In 2021, Far East Hospitality Trust, Manulife US REIT, Mapletree Logistics Trust, Mapletree North Asia Commercial Trust and Ascott Residence Trust have all secured green or sustainability-linked loans. Proceeds are mostly used to finance general working capital or green certified properties. 

 

In 2020, global sustainable debt issuance surpassed US$700 billion, up from US$566 billion in 2019 (according to Bloomberg). The notion of sustainable debt, which started off with an initial focus on green bonds, has evolved tremendously in the last few years. The scope of sustainable debt has expanded to include instruments such as sustainability-linked and social bonds, as well as green and sustainable-linked loans.



      
    
    Global Sustainable Debt Issuance


To encourage corporates to adopt sustainable business practices, provide them with access to green financing and anchor deep green finance expertise in Singapore, the Monetary Authority of Singapore (“MAS”) introduced a new Green and Sustainability-Linked Loan Grant Scheme (“GSLS”), effective since January 2021. The first of its kind globally, the GSLS supports corporates of all sizes to obtain green and sustainable financing by defraying the expenses of engaging independent sustainability advisory and assessment service providers to validate the green and sustainability credentials of the loan (click here for more information on the GSLS).  
 



Green loans are generally structured in the same way as standard loans except that proceeds from green loans are tracked and used for specific green projects which met certain benchmarked criteria.
	
Sustainability-linked loans generally do not restrict the use of proceeds but borrowers will have to commit to sustainability performance targets, and are awarded a reduction in interest rates if their sustainability targets are met. Therefore, sustainability-linked loans align companies to broad investor sustainability expectations and allow access to a wider range of companies who might not have specific green projects or funding needs. 
	 

While green or sustainability linked loan opens more avenues of funding, it also serves as a signal to investors on the firm’s commitment towards environment and sustainable business practices.  
As many as 12 Singapore REITs and Property Trusts have secured new or refinanced their green and/or sustainability-linked loans since the start of 2020 to 30 March 2021. Together, the 12 S-REITs obtained more than S$2 billion in loan amount, of which close to 54% are in the form of green loans while the other 46% are sustainability-linked loans.  Recent green and sustainability-linked loans by Singapore REITs and Property Trust  
In March 2021, Manulife US REIT (“MUST”) obtained its first sustainability-linked loan of US$250 million from DBS and OCBC. Loan terms incorporate interest rate reductions linked to the achievement of predetermined sustainability performance targets, including efficient use of energy and water, and management of greenhouse gas (GHG) emissions, in relation to MUST’s nine office properties in the U.S. Back in May 2020, MUST also obtained its maiden green loan of US$100 million of which proceeds will be primarily used to refinance Peachtree, a 27-storey Class A office building located in Midtown, Atlanta.  Ascott Residence Trust (“ART”) also secured its maiden green loan in January 2021. The S$50 million five-year green loan from DBS made ART the first hospitality trust in Singapore to secure a green loan. ART noted that proceeds from the green loan will be used to finance its maiden development project and co-living property, lyf one-north Singapore. lyf one-north Singapore is one of ART’s 15 properties that attained green certifications in 2020, bringing the total number of ART’s green properties to 21.  
All four of Mapletree-sponsored REITs have existing green and/or sustainability-linked loans. More recently, in 2021, both Mapletree Logistics Trust (“MLT”) and Mapletree North Asia Commercial Trust (“MNACT”) have secured new green loan facilities while Mapletree Industrial Trust (“MIT”) obtained its inaugural S$300 million sustainability-linked loan back in December 2020. Mapletree Commercial Trust (“MCT”) entered into a green loan facility in June 2020 to refinance loans relating to MCT’s properties which have been certified BCA Green Mark Gold or better. This follows MCT’s first S$670 million green loan in 2019 to part finance its acquisition of Mapletree Business City (Phase 2).  List of Singapore REITs and Property Trusts with new Green and/or Sustainability-linked loans since Jan 2020




			Name
			
			
			Code
			
			
			Loan Types
			
			
			Aggregated Loan Amount
			
			
			Mkt Cap S$M
			
			
			Dividend Yield (%)
			
		


			Ascott Residence Trust
			
			
			HMN
			
			
			Green Loan
			
			
			S$50m
			
			
			3,363
			
			
			2.8%
			
		


			CapitaLand Integrated Commercial Trust
			
			
			C38U
			
			
			Sustainability-linked1
			
			
			S$200m
			
			
			13,853
			
			
			5.4%
			
		


			Far East Hospitality Trust
			
			
			Q5T
			
			
			Sustainability-linked
			
			
			S$125m
			
			
			1,237
			
			
			5.3%
			
		


			Frasers Industrial and Commercial Trust
			
			
			BUOU
			
			
			Sustainability-linked2
			
			
			S$100m
			
			
			4,903
			
			
			4.8%
			
		


			Keppel REIT
			
			
			K71U
			
			
			Green Loan
			
			
			A$300m
			
			
			4,505
			
			
			3.1%
			
		


			Manulife US REIT
			
			
			BTOU
			
			
			Sustainability-linked &amp; Green Loan
			
			
			US$350m
			
			
			1,553
			
			
			7.6%
			
		


			Mapletree Commercial Trust
			
			
			N2IU
			
			
			Green Loan
			
			
			Not Available3
			
			
			6,997
			
			
			3.9%
			
		


			Mapletree Industrial Trust
			
			
			ME8U
			
			
			Sustainability-linked
			
			
			S$300m
			
			
			6,442
			
			
			4.4%
			
		


			Mapletree Logistics Trust
			
			
			M44U
			
			
			Green Loan
			
			
			S$200m4
			
			
			8,267
			
			
			4.1%
			
		


			Mapletree North Asia Commercial Trust
			
			
			RW0U
			
			
			Green Loan
			
			
			Not Available3
			
			
			3,503
			
			
			7.0%
			
		


			Soilbuild Business Space REIT
			
			
			SV3U
			
			
			Green Loan
			
			
			S$80m
			
			
			683
			
			
			7.3%
			
		


			Suntec REIT
			
			
			T82U
			
			
			Green Loan
			
			
			A$450m
			
			
			4,455
			
			
			4.7%
			
		

 1Loan made under CapitaLand Mall Trust before merger

2Loan made under Frasers Commercial Trust before merger

3Actual loan amount not disclosed

4Two new green loans made during the period, loan amount unavailable for most recent loan in Mar 2021

Source: Company Announcements, Bloomberg (Data as of 30 Mar 2021)



S-REITs secured over S$2 billion of green and sustainability-linked loans since 2020

Singapore

Manulife US REIT is a Singapore listed REIT established with the investment strategy principally to invest, directly or indirectly, in a portfolio of income-producing office real estate in key markets in the United States, as well as real estate-related assets.

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Manulife US REIT (MUST) (MUST SP)

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S-REITs secured over S$2 billion of green and sustainability-linked loans since 2020

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