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News Release

Bangkok

Thai REITs making good progress


​​​​Real estate investment trusts (REITs) have been introduced to Thailand since 2014. With a strong  response from the investor community, this listed property investment vehicle has gained popularity and played an increasingly important role in the country's real estate scene, according to the leading international property consultancy JLL.

 

Sarun Kunakool, Senior Manager of JLL Research and Consultancy at JLL, says: "Despite their infancy, REITs have received strong interest from investors, be they high net worth investors, mutual funds and insurance companies. This is due to relatively high and stable dividend yields that they offer and a lack of attractive investment alternatives in the current investment environment where equity markets remain relatively volatile and returns from fixed income and deposits remain unappealing. This listed property vehicle also provides investment exposure into real estate sectors such as office and logistics, which may not be accessible via ordinary shares."

 

Following the Impact Growth REIT, Thailand's first listing in 2014, around 13 REITs with a combined value of over THB 69 billion have been listed or converted from property funds to-date with GLAND Office Leasehold Real Estate Investment Trust (GLANDRT) being the latest listing. Established by G Land through its affiliate G Land REIT Management, GLANDRT contains two office buildings: the Ninth Tower and U-Place, with a combined value of over THB five billion. The new REIT has gained healthy investor interest, reflecting the strong investor appetite for REITs with office exposure.

 

While more REITs will be established, several existing property funds will likely be converted to REITs to enjoy more favourable rulings and other benefits. Among publicly known upcoming conversions is CPN Retail Growth Leasehold Property Fund (CPNRF), Thailand's largest and most liquid property fund. CPNRF is planned for conversion by the end of 2017.

 

Property funds, which primarily aim to allow failed companies to offload property assets, were first introduced to Thailand following the Asian financial crisis. However, their adoption and popularity remained limited until 2005 when CPNRF and Ticon Property Fund (TFUND) were listed to great interest. With the introduction of REITs, the property fund structure has been discontinued.

 

"REITs provide developers and investors a more attractive alternative to property funds," says Sarun. He explains that the new property investment vehicle provides a number of advantages over property funds, including greater flexibility in the type of real estate assets that REITs are allowed to invest in, higher financial leverage and the ability for 10 percent of total assets to be directly invested into greenfield projects.

 

REITs also represent an attractive vehicle for developers to divest assets. For example, Golden Ventures REIT (GVREIT) allowed Golden Land and Univentures to divest Sathorn Square and Park Ventures, respectively.

 

"One key drawback is that all REIT unit holders are subject to tax, whereas foreign and institutional holders of property funds are generally tax-exempt. However, the flexibility of greater financial leverage can help boost prospective yields for REITs, helping offset a higher tax rate," says Sarun.

 

"The future of REITs in Thailand remains bright, given the added flexibility that REITs offer over the now-defunct property funds. We expect investor interest in REITs to continue to grow," he concludes.