REITS AROUND ASIA 1h 2010 CBRE RESEARCH ASIA

Transcription

1 REITS AROUND ASIA 1h 2010 CBRE RESEARCH ASIA

2 CONTENTS Market Overview 3 Market Snapshot Hong Kong 5 Japan 6 Singapore 8 Taiwan 10 South Korea 11 Thailand 12 Malaysia 13 Asian REIT Legislation Overview 14 Asia Offices CB Richard Ellis, Inc. We obtained the information above from sources we believe to be reliable. However, we have not verified its accuracy and make no guarantee, warranty or representation about it. It is submitted subject to the possibility of errors, omissions, change of price, rental or other conditions, prior sale, lease or financing, or withdrawal without notice. We include projections, opinions, assumptions or estimates for example only, and they may not represent current or future performance of the property. You and your tax and legal advisors should conduct your own investigation of the property and transaction.

3 MARKET OVERVIEW 3 MARKET OVERVIEW Number of LISTED REITS / PROPERTY FUNDS in Asia Before H 2010 Source: CBRE Research IPO Total number REIT IPOS (1H 2010) MARKET CAPITALISATIION LISTING (US$ MILLION) MARKET NAME OF REIT DATE AS OF END JUN 10 Korea KOCREF Jan Japan Advance Residence Investment 2-Mar-10 1,252.0 Singapore Cache Logistics Trust 12-Apr Hong Kong Fortune REIT 20-Apr Korea Golden Narae Real Estate Development 3-May Investment Trust Thailand Thai Commercial Investment Fund 16-Jun Asian REITs witnessed mixed fortunes in the first half of 2010 with some markets seeing increased IPO and acquisition activity and others enduring delisting applications, mergers and consolidations. REITs in Japan, Taiwan, Korea and Hong Kong outperformed their respective stock markets, all of which suffered downward adjustments in the second quarter amid concerns over the pace of the global economic recovery. Six new REITs were launched during the first six months of the year in what was a dynamic period for IPOs. The total market capitalisation of Asian REITs surged by 24.7% y-o-y to US$69.0 billion during the first half. First half sees rise in IPOs activity Korea saw the launch of two new K-REITs during the review period with the KOCREF 15 REIT and Golden Narae Real Estate Development REIT raising KRW 25 billion (US$20.5 million) and KRW 145 billion (US$118.6 million) respectively. Singapore-listed Fortune REIT became the first Asian REIT to obtain a dual listing position, doing so by way of introduction on the Hong Kong bourse. Fortune REIT had a portfolio of 14 suburban retail malls and other properties in Hong Kong valued at HK$11.5 billion as of the end of Cache Logistics Trust, which has a portfolio consisting of six logistic properties valued at S$730 million, was also successfully launched onto the Singapore REIT market in April. Thailand saw the listing of one new property fund, the Thai Commercial Investment Fund, during the first half. Malaysia also saw new listing activity with Sunway REIT (SunREIT) and CapitaMalls Malaysia Trust (CMMT), two of the largest M-REITs, finalising their IPOs. SunREIT was the first to proceed with its IPO, raising proceeds of RM 1.47 billion (US$453 million) in late June. CMMT began trading a few weeks later in mid-july. Asian REITs turn more active in investment market The renewed IPO activity helped stimulate REIT acquisitions, which totaled US$5.75 billion during the first half. The figure comfortably surpassed the US$4.2 billion recorded for the whole of 2009 and was almost 55% of the level (US$10.5 billion) recorded in Japan remained the most active market for asset purchases with Mori Trust Sogo REIT s JPY 110 billion (US$1.24 billion) acquisition of a 50% stake in the Tokyo ASIAN LISTED REITS / PROPERTY FUNDS AS OF END June 10 MARKET * CBRE changed the calculation methodology of average dividend yield from simple average to weighted average by market capitalisation in 1H Source: CBRE Research, Bloomberg STOCK MARKET INDEX STOCK INDEX CHANGE FROM END DEC 2009 NO. OF LISTED REITS AVG. DIVIDEND YIELD* 10-YR GOV'T BOND YIELD REIT MARKET CAP (US$ MILLION) Japan 9, % % 1.09% 32,024 Singapore 2, % % 2.37% 21,140 Hong Kong 20, % % 2.29% 9,883 Thailand % % 3.15% 2,248 Taiwan 7, % % 1.40% 1,764 Malaysia 1, % % 3.91% 1,735 South Korea 1, % % 4.95% 198

4 4 REITS AROUND ASIA 1H 2010 Shiodome Building the largest transaction completed by a REIT in Asia in the first half year. Other J-REITs including Frontier Real Estate Investment REIT and Japan Real Estate were also observed acquiring assets for portfolio expansion. In Singapore, S-REITs returned to the acquisition trail on the back of rebounding prices and the easing of refinancing concerns. Frasers Centrepoint Trust purchased two shopping malls for a total consideration of S$290 million (US$207 million), while CapitaMall Trust acquired Clarke Quay from CapitaMalls Asia for S$268 million (US$192 million). Mapletree Logistics Trust and Ascendas Real Estate Investment REIT were also active buyers. Elsewhere, Malaysia witnessed a steady flow of acquisitions by M-REITs including Amanahraya REIT, Axis REIT and UOA REIT, which spent a combined total of US$274 million on office, industrial, retail and healthcare assets. REITs in Hong Kong, Korea, Taiwan and Thailand were inactive. Consolidation activity continues The bout of J-REIT merger and consolidation activity witnessed in recent periods continued into the first half of Japan Rental Housing Investments, which is sponsored by the Oaktree Group, agreed to merge with Prospect REIT Investment, whilst Japan Single-residence REIT was absorbed by Crescendo Investment Corporation. Nippon Commercial Investment and United Urban Investment also announced plans to consolidate. The combined entity will have an asset value of JPY 458 billion (US$5.2 billion), ranking it among the top five J-REITs in the country. The aforementioned mergers are all scheduled to be completed in the second half of year. Also during the first half, the bankrupt Joint REIT Investment Corporation secured Sekisui House and Spring Investment as its new sponsors and successfully raised JPY 1.8 billion through a third party allotment. The trade name of Joint REIT Investment Corporation was subsequently changed to Sekisui House SI Investment Corporation, effective on 30 June. Following the latest round of mergers and consolidations the total number of J-REITs stood at a total of 35, down from the 42 operating at the peak of the market. the same city - to the Mapletree India China Fund. The H-REIT is expected to be terminated its listing position after its liquidation by the end of KR2 REIT filed for delisting due to the reduction of its paid-in-capital after several shareholders opted to lock in profits and withdraw their investment in light of what they saw as an uncertain outlook for the market. Shareholders in the K-REIT were offered an attractive average annual investment yield of 15%, the highest distribution yield among all other Asian REITs. In Taiwan, a number of T-REITs were the subject of rumours suggesting their impending liquidation as a result of their persistent low trading price in respect to their net asset value, despite the upbeat market. Asian REIT market expected to see stable second half Although the weighted average dividend yield for Asian REITs contracted further from 8.06% in the first half of 2009 to 6.86% in the first half of 2010, they generally still provide comparatively high dividends over their respective government bonds. However, after the series of REIT delistings and liquidation rumors, investors may demand stronger stock performance along with rising asset prices. The second half of the year should see the launching of a REIT market in the Philippines after the local Stock Exchange approved the country s REIT listing rules in June. A number of major local real estate developers have already indicated their interest in launching REITs in Philippines. Over the next six months Asian REITs should recapitalise with ease and will continue to acquire new assets and conduct fund raising exercises. However, in light of rising concerns over the pace of the global economic recovery, Asian REITs are expected to perform steadily over the remainder of the year, in contrast to the rapid gains they enjoyed in the first half. Despite the general improvement in real estate market sentiment and the wave of new IPO activity, a number of Asian REITs opted to delist during the first half. RREEF China Commercial REIT (RREEF CCT REIT) and KR2 REIT filed for termination in Hong Kong and Korea respectively. RREEF CCT REIT was reportedly concerned about the oversupply of Grade A office space in Beijing and chose to sell its only asset the Gateway Plaza office building in TOP TEN ACQUISITIONS BY ASIAN REITS (1h 2010) US$ (MILLION) COUNTRY CITY SECTOR PROPERTY EQUIVALENT BUYER Japan Tokyo Office 50% share in Tokyo Shiodome Building 1,244 Mori Trust Sogo REIT Japan Tokyo Retail LABl 1 Nihon Flagship Store 802 Simplex REIT Japan Tokyo Office Tokyo Opera City Building 240 Japan Real Estate Investment Corporation Singapore Singapore Industrial CWT Commodity Hub 231 Cache Logistics Trust Japan Various Cities Mixed Orix s property portfolio (Three properties) 221 ORIX JREIT Singapore Singapore Retail Clark Quary 192 CapitaMall Trust Japan Iwata Retail LaLaport Iwata 172 Frontier Real Estate Investment Corporation Japan Tokyo Office JPR Sendagaya Building 170 Japan Prime Realty Investment Jaapn Tokyo Retail Ginza Glasse 154 Frontier Real Estate Investment Corporation Singapore Singapore Retail Northpoint Frasers Centrepoint Trust

5 MARKET SNAPSHOT 5 HONG KONG The first half of 2010 saw the Hong Kong REIT market continue to improve with a 2.88% increase in the market-cap weighted average price, outperforming the benchmark Hang Seng Index which slipped by 7.97% during the same period. Total market capitalisation also rose by 3.8% to US$9.9 billion. The period saw the first new H-REIT listing since June 2007 with the listing of Fortune REIT on the Hong Kong Stock Exchange by way of introduction, which made a total of eight listed H-REITs as of the end of the first half of the year. The new Fortune REIT, which owned 14 retail malls and parking facilities in Hong Kong with a total value of HK$11.5 billion as of 31 December 2009, is the first H-REIT to have a dual listing position on both Singapore and Hong Kong exchanges. The REIT s dual listing strategy aims to widen the base of private and institutional investors to enhance liquidity as it believes the Singapore and Hong Kong markets can attract different investor profiles. The average trading volume in Singapore has been more than double of that in Hong Kong since its dual listing as the investor base in Hong Kong is still emerging. The review period saw the first ever application from an H-REIT to terminate its listing position. In view of the negative impact on earnings growth resulting from the continued increase in Grade A office supply in Beijing, the RREEF China Commercial REIT opted to sell the single asset in its portfolio, Gateway Plaza, to Mapletree India China Fund for a total consideration of HK$1.9 billion, which translated to an estimated disposal loss of about HK$145 million. The H-REIT later submitted its application to delist from the Hong Kong Stock Exchange and suspended trading on 19 April 2010 ahead of its liquidation. The whole arrangement is expected to be completed by the end of The income growth of H-REITs varied in the first half. The Link REIT increased its DPU by 15.9% y-o-y to HK$ for the financial period ending March 2010 thanks to upward rental revisions at renewal, high occupancy rates and other rental gains following the completion of several asset enhancement projects. GZI REIT and Regal REIT also increased their DPU by 2.4% y-o-y to HK$ and 1.4% y-o-y to HK$0.17 respectively for the financial year ending December GZI REIT s DPU growth was mainly due to the higher overall occupancy rate in its Guangzhou office buildings while Regal REIT benefited from mainland tourists demand for hotel rooms. Meanwhile, other H-REITs were still struggling to maintain profit levels. Prosperity REIT s DPU decreased by 13.4% y-o-y to HK$ due to higher finance costs as a result of unwinding interest rate swap Hang Seng REIT Index H-REIT PRICE MOVEMENT (JUL 09 JUN 10) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Hang Seng REIT Index Hang Seng Index Mar 10 Apr 10 May 10 Jun 10 25,000 20,000 15,000 10,000 contracts it entered into in July Elsewhere, Sunlight REIT and Champiion REIT cut their dividend payout ratio from 100% to 90%. Both have faced a relatively high volume of tenancy expiration and have also been hit by the wave of relocations to newly completed office buildings in East Kowloon. The market has therefore been concerned about the potential decline in the occupancy rate of their existing portfolio, and the cuts in their payout ratios might reflect their need to preserve cash for operational and future obligations. H-REITs refrained from acquiring new properties during the first half, choosing instead to focus on asset enhancement projects to improve the competitiveness of properties in their portfolio. Only GZI REIT was active, studying the feasibility of acquiring a retail project in Beijing and an office project in Guangzhou. GZI s right to acquire four properties in Guangzhou from its major shareholder Yuexiu Properties Limited will expire at the end of 2010 and the H-REIT is therefore likely to make such acquisitions in the second half of the year. The Hong Kong commercial property sector has now largely recovered from the downturn beginning in late With occupancy and rentals both improving, H-REITs will enjoy a more positive operating environment going forward. As of the end of June 2010, H-REITs posted a weighted average dividend yield of 6.32% (excluding RREEF China Commercial REIT), well above the 2.286% yield on 10-year exchange fund notes. Investors in H-REITs should enjoy both high yields and potential improvements in rental income over the remainder of ,000 0 Hang Seng Index REIT PERFORMANCE DATE OFFER PRICE CLOSING PRICE % CHANGE 52-WEEK HIGH 52-WEEK LOW DISTRIBUTION NAME OF REIT LISTED (HK$) 30 JUN 10 (HK$) SINCE DEC 09 (HK$) (HK$) YIELD (JUN 10) The Link REIT 25-Nov % % Prosperity REIT 16-Dec % % GZI REIT 21-Dec % % Champion REIT 24-May % % Sunlight REIT 21-Dec % % Regal REIT 30-Mar % % RREEF CCT REIT 22-Jun % % Fortune REIT 20-Apr ** %* %^ * Change over offer price ** The offer price was Fortune REIT s closing price in Singapore on 19 April 2010 ^ Dividend yield based on Fortune REIT s distribution in Singapore

6 6 REITS AROUND ASIA 1H 2010 JAPAN Improved capital and financial markets enabled J-REITs to raise equity and make several high profile acquisitions in the first half of Smaller J-REITs also benefited from the security offered by the Real Estate Market Stabilisation Fund, which made its first loan in March to Prospect Reit Investment Corporation. M&A activity continued apace with the announcement of three new J-REIT mergers in addition to the four mergers revealed previously, including the first plan to consolidate major multi-sector J-REITs with diversified portfolios. The TSE REIT Index fell 2.0% during the first half but comfortably outperformed the Nikkei 225 Index which dropped 11.0% during the same period. The weighted average distribution yield of the 38 listed J-REITs was 6.96%, up from 6.81% as of the end of 2009, while the spread over the 10-year Japanese Government Bond widened to 587 bps from 552 bps in the first half of 2010, combined with the effect of a decline in the JGB coupon to 1.09% from 1.295%. J-REIT PRICE MOVEMENT (JUL 09 JUN 10) J-REIT Index 1,200 1, Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 J-REIT NIKKEI 225 Apr 10 May 10 Jun 10 12,000 10,000 8,000 6,000 4,000 2,000 0 Nikkei 225 Index Consolidation activity continued to be focused on residential J-REITs. February saw Japan Rental Housing Investments (JRH) and Prospect Reit Investment (PRI) merge, with JRH, sponsored by Oaktree Group, agreeing to acquire PRI at a merger ratio of 1:0.75. The combined asset size of the two J-REITs was JPY billion (US$2.0 billion) based on original acquisition prices, and the effective date of the merger was 1 July In June, Japan Single-residence REIT (JSR) agreed to be absorbed by Crescendo Investment Corporation (CIC). The planned merger ratio is 1 (CIC):0.75 (JSR) and is scheduled to complete on 1 October 2010 with the new REIT having JPY billion (US$1.7 billion) of assets. JSR had been suffering from weak sponsorship, following the failure of Lehman Brothers in September 2008 and difficulties at K.K. davinci Holdings. The performance of the consolidated REIT will be carefully monitored by the market. February saw Sekisui House and Spring Investment become the new sponsors of Joint Reit Investment Corporation (JRI). Since its bankruptcy in May 2009 JRI had been seeking a replacement sponsor and Sekisui House, the top housing contractor in Japan, purchased a 75% stake in its asset management company. Spring Investment (established by the MBO of Babcock & Brown Co., Ltd.) acquired the remaining 25% stake. JRI raised JPY 1.8 billion by third party allotment to the two sponsors on a pro-rata basis. April saw Nippon Commercial Investment (NCI) agree to be absorbed by United Urban Investment (UUR) at a planned merger ratio of 6 (UUR) :1 (NCI). Following the collapse of Pacific Holdings, its original sponsor, NCI had entered discussions with a number of potential sponsors before finalising terms with UUR. The effective date of the merger is planned for 1 December 2010 and the combined REIT will rank among the top five J-REITs with assets totaling more than JPY billion (US$5.2 billion). As a result of the seven mergers, the total number of listed J-REITs will decrease to 35 from 42 at the peak of the market. Taking into consideration the change of sponsors at other J-REITs, there seems to be limited opportunity for further mergers, and the wave of consolidation should be nearing an end, leaving a sturdier J-REIT market with improved credit status. Blue-chip J-REITs continued to be active in the market. Among the first half s most notable transactions was Mori Trust Sogo REIT s purchase in April of a 50% stake in the Tokyo Shiodome Building in Minato-ku for JPY 110 billion (US$1.24 billion) at an estimated 4.5% NOI cap rate. Completed in 2005, the landmark office and hotel building provides a GFA of slightly more than 2 million sf over 37 upper and 4 basement floors. Mori Trust, the sponsor of the Mori Trust Sogo REIT, was the seller, and also succeeded in raising JPY 39 billion from the capital market through a public offering of 60,000 new shares during the review period. June saw Frontier Real Estate Investment REIT (FRI) acquire two retail properties from Mitsui Fudosan (its sponsor) and a Mitsui Fudosan related company. The first acquisition was LaLaport Iwata in Iwata City, Shizuoka, which is a regional shopping centre completed in 2009 providing a total GFA of more than 1.4 million sf. It was acquired for JPY 15.2 billion (US$172 million) at an estimated 6.5% NOI cap rate. The second purchase, Ginza Glasse, is located in the prime retail submarket of Ginza in Tokyo. Completed in 2008, the building provides a GFA of 77,520 sf over 11 storeys above ground and two storeys below. The purchase price of JPY 13.6 billion (US$154 million) equated to an estimated 4.0% NOI cap rate. DIESEL, the Italian casual fashion brand, occupies three floors in the building. Also during the period, FRI took advantage of the improved capital markets to raise JPY 19.5 billion, with JPY 18.3 billion coming through a public offering of 32,000 new shares and JPY 1.2 billion through a third party allocation of 2,000 new shares. Among the other active REITs was Japan Real Estate, which in February purchased a 23% stake in the Tokyo Opera City Building in Shinjuku-ku for JPY 22.4 billion from Odakyu Railway at an estimated 5.9% NOI cap rate. The building, completed in 1996, provides a GFA of 2.5 million sf over 54 storeys above ground and four basement floors, and enjoys convenient access to Shinjuku station, one of Tokyo s primary rail hubs.

7 MARKET SNAPSHOT 7 REIT PERFORMANCE DATE OFFER PRICE CLOSING PRICE % CHANGE 52-WEEK HIGH 52-WEEK LOW DISTRIBUTION NAME OF REIT LISTED (JPY) 30 JUN 10 (JPY) SINCE DEC 09 (JPY) (JPY) YIELD (JUN 10) Nippon Building Fund 10-Sep , , % 897, , %* Japan Real Estate Investment 10-Sep , , % 860, , % Japan Retail Fund Investment** 12-Mar , , % 130,500 83, % ORIX JREIT 12-Jun , , % 505, , % Japan Prime Realty Investment 14-Jun , , % 229, , %* Premier Investment Corporation 10-Sep , , % 434, , % TOKYU REIT 10-Sep , , % 565, , % Global One Real Estate Investment 25-Sep , , % 767, , % Nomura Real Estate Office Fund 4-Dec , , % 683, , % United Urban Investment 22-Dec , , % 627, , %* Mori Trust Sogo REIT 13-Feb , , % 842, , % Invincible Investment Corporation** 17-May-04 80,000 13, % 26,920 12, %* Frontier Real Estate Investment 9-Aug , , % 746, , %* CRESCENDO Investment 8-Mar , , % 188, , %* Japan Logistics Fund 9-May , , % 768, , % Fukuoka REIT 21-Jun , , % 609, , % Prospect REIT Investment 12-Jul ,000 85, % 151,900 63, % Japan Single-residence REIT 13-Jul , , % 141,400 81, % Kenedix Realty Investment 21-Jul , , % 356, , % Sekisui House SI Investment 28-Jul , , % 278, , % FC Residential Investment 12-Oct , , % 304, , % DA Office Investment 19-Oct , , % 353, , %* Hankyu REIT 26-Oct , , % 449, , %* Starts Proceed Investment 30-Nov ,000 86, % 105,000 76, % Japan Hotel and Resort, Inc. 15-Feb , , % 187, , %* Top REIT, Inc. 1-Mar , , % 494, , % Japan Office Investment 15-Mar ,000 82, % 108,300 77, % BLife Investment 22-Mar , , % 520, , %* Nippon Hotel Fund Investment 14-Jun , , % 214, , % Japan Rental Housing Investment** 22-Jun ,500 30, % 46,950 23, % Japan Excellent, Inc. 27-Jun , , % 500, , % Nippon Accommodations Fund 4-Aug , , % 532, , % MID REIT 29-Aug , , % 249, , % Nippon Commercial Investment 26-Sep ,000 85, % 196,400 77, % Mori Hills REIT Investment 30-Nov , , % 376, , % Nomura Real Estate Residential Fund 14-Feb , , % 445, , %* Industrial & Infrastructure Fund 18-Oct , , % 383, , %* Advance Residence Investment 2-Mar , , %^ 137, , %* * Includes forecast dividends ** Implements stock split ^ Change over offer price

8 8 REITS AROUND ASIA 1H 2010 SINGAPORE The S-REIT market enjoyed a positive first half of 2010 with the period seeing one new REIT listing and renewed acquisition activity. Cache Logistics Trust (CLT) was listed on the Singapore Exchange in April 2010 with an initial portfolio comprising of six logistics properties located in Singapore with an aggregate GFA of approximately 3.9 million sf and an average independent valuation of S$729.9 million. 97.3% of the Initial Portfolio s GFA consisted of modern ramp-up logistics warehouses, representing a significant market share of ramp-up warehouse space in Singapore. Most of these properties are strategically located in established logistics clusters near Changi Airport, PSA Terminals and Jurong Port. CLT listed on 12 April 2010 at S$0.88 before closing the initial day s trade at S$ The forecasted distribution yield is 8.82% based on the offer price. Following the successful listing of CLT, other REITs will begin the process of listing over the reminder of the year, especially now that the domestic economic recovery is firmly on track. The CLT listing was the first property trust IPO in almost two years and its subscription rate of approximately 7.8 times demonstrated the market s strong appetite for new REIT products. After the completion of recapitalisation exercises and major refinancing in 2009, the S-REIT sector has been re-rated and prices have rebounded. With many listed S-REITs free from refinancing concerns, the impetus to re-enter the acquisition trail is strong. In January, Frasers Centrepoint Trust (FCT) acquired Northpoint 2 at Yishun for S$164.6 million and YewTee Point in Choa Chu Kang for S$125.7 million from its sponsor Frasers Centrepoint, the property arm of Fraser and Neave. The following month saw CapitaMall Trust (CMT) purchase Clarke Quay from parent company CapitaMalls Asia for S$268.0 million. Mapletree Logistics Trust (MLT) was also active, acquiring two properties for a total of S$87.5 million in the first five months of 2010, while Ascendas Real Estate Investment Trust (A-REIT) acquired DBS Asia HUB and 31 Joo Koon Circle for a combined S$131.0 million in February. While these S-REITs were acquiring properties, CapitaCommercial Trust sold Robinson Point in January. The property, a freehold 21-storey office building, was sold to fund manager AEW Asia for S$203.3 million or S$1,527 psf based on its lettable area of 133,139 sf. S-REIT PRICE MOVEMENT (JUL 09 JUN 10) 30 Jun 09 = Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 A-REIT CapitaMall Trust Straits Times Index The simplicity of S-REITs as an investment instrument, their strong underlying fundamentals and relatively risk averse nature continue to make them an attractive option for investors. The S-REIT market has developed and matured over the last eight years, in size as well as in complexity and depth. S-REIT portfolios now cover a wide array of assets in retail, commercial, industrial, healthcare, hospitality and residential sectors, all of which are situated in diverse locations around the region. Investors in REITs have also evolved and now look towards the potential of a REIT s property portfolio. These include factors such as asset type, geographical location, occupancy rates, demographics, lease terms, tenant quality and diversity, all of which combine to provide support for the portfolio s aggregate rental income and in turn the sustainability and stability of the REIT s distributable income. Investors also consider the REIT manager as this directly involves the development and implementation of the REIT s investment strategy, the management of its portfolio and capital structure to foster long-term profitability. Apr 10 May 10 Jun 10 The total market capitalisation of S-REITs stood at US$21.1 billion as of the end of the first half, making it the second largest REIT market in Asia after Japan. The outlook for S-REITs is stable as the sector continues to be supported by the strong rebound in Singapore s economy, the stabilisation of rents across the retail, office and industrial property sub-sectors as well as the steady performance and lower refinancing risk of many S-REITs.

9 MARKET SNAPSHOT 9 REIT PERFORMANCE DATE OFFER PRICE CLOSING PRICE % CHANGE 52-WEEK HIGH 52-WEEK LOW DISTRIBUTION NAME OF REIT LISTED (S$) 30 JUN 10 (S$) SINCE DEC 09 (S$) (S$) YIELD (JUN 10) CapitaMall Trust 17-Jul % % Ascendas REIT 19-Nov % % Fortune REIT 12-Aug-03 HK$4.75 HK$3.550* 13.42% HK$3.960 HK$ % CapitaCommercial Trust 11-May % % Suntec REIT 9-Dec % % Mapletree Logistics Trust 28-Jul % % Starhill Global REIT 20-Sep % % Frasers Commercial Trust 30-Mar % % Ascott Residence Trust 31-Mar % % K-REIT Asia 28-Apr % % Frasers Centrepoint Trust 5-Jul % % CDL Hospitality Trusts 19-Jul % % Cambridge Industrial Trust 25-Jul % % CapitaRetail China Trust 8-Dec % % First Real Estate Investment Trust 11-Dec % % AIMS AMP Capital Industrial REIT 19-Apr % % Ascendas India Trust 1-Aug % % Parkway Life REIT 23-Aug % % Saizen REIT 9-Nov % ** Lippo-Mapletree Indonesia Retail Trust 19-Nov % % Indiabulls Properties Investment Trust 11-Jun % ^ Cache Logistics Trust 12-Apr % % # * The closing price of Fortune REIT was different from Hong Kong as the closing time of both markets differ ** Saizen may resume distribution in September 2010 ^ No distribution was declared by Indiabulls Properties Investment Trust in the past 12 months # Dividend yield based on company s forecast distribution per unit

10 10 REITS AROUND ASIA 1H 2010 TAIWAN T-REITs witnessed a mild fall in price in the first half of 2010 but nevertheless outperformed the Taiwanese stock market, which slid 10.5% over the review period on the back of global market volatility. T-REITs market cap-weighted average price fell marginally by 85 basis points during the period, resulting in a minor fall of 1.0% in the total market capitalisation of the eight T-REITs to NT$56.9 billion (US$1.8 billion). No new T-REITs were launched during the first half of 2010 and it is now three years since the last listing. The inactive market was also reflected by the ongoing lack of any acquisitions by T-REITs, the last of which took place in March The considerable increase in the capital value of commercial property in Taiwan over the past year has been largely attributed to T-REITs lack of acquisition activity. The weighted average dividend yield for T-REITs ended the first half at 3.98%, slightly compressed from 4.11% recorded at the end of December Nevertheless, with the 10-year government bond yield decreasing to 1.4% in June 2010, the yield spread remained nearly unchanged at 2.57%. T-REIT PRICE MOVEMENT (JUL 09 JUN 10) 30 Jun 09 = Jul 09 Aug 09 Sep 09 Oct % registered in the fourth quarter of Nov 09 Dec 09 Jan 10 Feb 10 Fubon No.1 REIT Cathay No.1 REIT TAIEX Mar 10 Apr 10 May 10 Jun 10 Despite the comparatively high dividend yields to bond yield, most T-REITs, with the exception of Cathay No.1 REIT, were traded below their net asset values (NAV). At the same time, robust investment demand in the Taiwan real estate sector significantly pushed up transaction prices, leading some shareholders to ask whether T-REITs should be liquidated to realise their true value amid the upbeat property market conditions. Rumours of the impending liquidation of a select number of T-REITs, namely Trident, Kee Tai Star and Gallop No.1 REITs, spread during the period and T-REIT managers were forced to deny the reports. T-REITs backed by large local financial groups, such as Fubon No.1 and Cathay No.1 REITs, continued to be popular among investors and appeared to be free from liquidation rumours. The dividend yield for Gallop No.1 REIT stood at 4.24% during the first half. The high dividend yield, however, was not supported by attractive dividend distribution but resulted from the weak stock price, which stood at NT$8.50 on 30 June The drop in rental income resulting from the relocation of large tenants in two of the T-REITs office buildings, the CTCI building and the Honeywell Information Building, in its portfolio in 2009 was already reflected in the dividend paid over the 12 months. The distribution dividend recorded a 13.3% decline during the first half. Fortunately the decrease in rents is expected to cease in the upcoming months as the occupancy rate has gradually improved, accompanied by a modest increase in the average rental rate. The Honeywell Information Building currently enjoys a low vacancy rate of 3.2%, a substantial improvement on the Kee Tai Star REIT also saw its distributable income contract with the dividend payable to shareholders decreasing 10.6% over the first six months of the year. The City Lake Hotel, an anchor tenant accounting for 45% of the total rental income of Kee Tai Star, failed to pay monthly rents on time in the fourth quarter of 2009, forcing Kee Tai Star to lower the monthly rent by 25% to NT$3.0 million (US$93,000) in the first quarter of According to the new lease agreement, the current rent level of NT$3.0 million will be revised upwards to NT$3.1 million (US$96,000) from February 2015 onwards. The deterioration of rental income has therefore cast some doubt on Kee Tai Star s future performance. Following the amendment to the Real Estate Securitisation Act passed in January 2009, which allows T-REITs to invest in development projects including urban renewal, infrastructure and public amenities construction, the Financial Supervisory Commission announced the long-awaited investment ceiling for T-REITs. For publicly listed T-REITs, a maximum 15% of their total asset value will be allowed to be invested in properties under development. In the case of privately placed T-REITs, the ceiling will be set at 40%. The new regulations were promulgated in the expectation that part of the excess capital will flow into infrastructure development, which is the main focus of current Taiwanese economic policy. Nevertheless, as the T-REIT market has been fairly inactive compared to other Asian markets, it remains uncertain whether the new regulatory changes will encourage existing T-REITs to invest in uncompleted projects, or revive the T-REIT IPO market. REIT PERFORMANCE DATE OFFER PRICE CLOSING PRICE % CHANGE 52-WEEK HIGH 52-WEEK LOW DISTRIBUTION NAME OF REIT LISTED (NT$) 30 JUN 10 (NT$) SINCE DEC 09 (NT$) (NT$) YIELD (JUN 10) Fubon No. 1 REIT 10-Mar % % Cathay No.1 REIT 3-Oct % % Shin Kong No.1 REIT 26-Dec % % Fubon No. 2 REIT 13-Apr % % Trident REIT 26-Jun % % Kee Tai Star REIT 14-Aug % % Cathay No.2 REIT 13-Oct % % Gallop No.1 REIT 15-May % %

11 MARKET SNAPSHOT 11 SOUTH KOREA The K-REIT market was quiet in the first half of 2010, reflecting the stagnant Korean real estate investment market. Although capital raising appeared to improve significantly on the back of strong economic growth, lenders remained cautious amid fears of a slower real estate market recovery. In the second half of 2009 the original number of planned new K-REIT launches was 12 but this was reduced by one following KVG 1 CR-REIT s withdrawal after failing to acquire Ganbyeong Techno Mart. The first half of 2010 saw a further four launches, meaning that the total number of K-REITs stood at 39 as of 30 June The trend of launching K-REITs investing in unsold apartments, which was at its peak in 2009, fell away in the first half of 2010 as the deterioration of the housing market dissuaded further launches of this type. K-REIT PRICE MOVEMENT (JUL 09 JUN 10) 30 Jun 09 = KOCREF 7 KOCREF8 KOSPI Composite The review period saw the first ever reduction of paid-in capital in the K-REIT market. KR2 REIT suspended trading on 25 May and will shortly be delisted from the stock exchange. KR 2 REIT was the country s first development K-REIT and completed two apartment-type factory development projects in Gasan-dong and Guro-dong in Seoul. Following their completion in the fourth quarter of 2009 and the first quarter of 2010, KR 2 REIT recorded its first surplus as result of beginning unit pre-sales. However, a number of investors opted to take profits and withdraw their investment amid the uncertain real estate market outlook, and KR 2 REIT therefore decided to reduce its paid-in capital. Investors who requested the withdrawal were able to receive KRW 5,700 per share. Considering the par value of KR2 REIT was KRW 5,000 per share and its total received dividend was KRW 799 per share for two years, the K-REIT provided an attractive average annual investment yield of approximately 15% for two years. Two K-REITs, KOCREF 15 and Golden Narae Real Estate Development, successfully listed on the Korean Stock Exchange through IPO during the first half, whilst another, the Dasan selfmanaged REIT, was forced to push back its listing. After KOCREF 15 acquired the Insong Building, a Grade B office building in the CBD with a GFA of 336,616 sf, it proposed raising proceeds of KRW 25 billion through a public offering in December However, due to the sluggish office market, it could only raise 52% of the proceeds from the IPO, and Hanhwa Securities, which was its IPO adviser, was obliged to invest the remaining 48%. KOCREF 15 was finally listed on the Korean Stock Exchange on 29 January. Meanwhile, Golden Narae Real Estate Development REIT successfully raised KRW 145 billion through IPO and was listed on the Korean Stock Exchange with strong expectations over future capital gains on its residential development project. These strong expectations were fully incorporated into the stock price 0 Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09 but following the listing it surged rapidly and formed a speculative bubble amid the sluggish housing market. The K-REIT s share price jumped approximately 600% from its par value of KRW 5,000 immediately after its listing but subsequently stabilised to around KRW 15,000 per share. Elsewhere, the Dasan self-managed REIT, which plans to invest in the hotel and accommodation industry, failed to raise KRW 65 billion through its IPO due to uncertainty surrounding some of its projects. There were reports that it would attempt to conduct its IPO again sometime before the end of the year. The period also saw the Cabinet Council pass a series of new amendments to the Korean REITs Act in an attempt to spark K-REIT activity in the Korean real estate market. Under the new amendments, K-REIT will be able to dispose of their assets one year from the date of acquisition instead of the previous rule of three years. However, the government maintained the three-year restriction on K-REITs investing in the housing market, excluding unsold apartments, in order to rein in speculation. Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun 10 REIT PERFORMANCE DATE OFFER PRICE CLOSING PRICE % CHANGE 52-WEEK HIGH 52-WEEK LOW DISTRIBUTION NAME OF REIT LISTED (KRW) 30 JUN 10 (KRW) SINCE DEC 09 (KRW) (KRW) YIELD (JUN 10) KOCREF 7 11-Nov-05 5,000 5, % 7,000 5, % KOCREF 8 15-Jun-06 5,000 5, % 6,380 5, % KR2 8-May-08 5,000 5, % 6,210 4, % KOCREF Jan-10 5,000 5, %* 5,320 4,990 Golden Narae Real Estate Development 3-May-10 5,000 12, %* 35,300 10,000 Investment Trust * Change over offer price

12 12 REITS AROUND ASIA 1H 2010 THAILAND Despite ongoing political unrest the Thai economy continued to improve in the first half of 2010 and the period saw the market cap weighted average price of Thai listed property funds rise by 8.0%, the same rate of growth as that recorded by the SET index. One new property fund, the Thai Commercial Investment Fund (TCIF), was listed during the review period. Total market capitalisation consequently rose by 10.7% to THB 72.8 billion. TCIF was listed on 16 June and is a closed-end freehold property fund managed by Krung Thai Asset Management. The fund has already invested in the Nation Tower Building Complex, which consists of three office buildings and one parking garage. TCIF had a market capitalisation at IPO of approximately THB 1.96 billion with par value of THB 10 per unit, and will offer a guaranteed minimum return of 4%-5% over the next three years. The dividend yield for Thai listed property funds compressed slightly to 4.8%-10.3% as of the end of the first half of 2010, compared to the figure of 4.9%-11.9% recorded in the second half of The weighted average dividend yield was 8.2%, which still offered a higher return compared to banks annual fixed deposit rates, which stood at 0.6%-1.8% as of 30 June. Following the political violence witnessed in April, fund managers were reportedly considering buying coverage for terrorism and business interruption, in addition to taking out mandatory all-risks insurance, a move that would increase the insurance premium paid. The insurance issue has so far failed to discourage local companies from launching property funds, given the improving overall investment market, and a number of funds are planned to be launched over the remainder of The Mercure Samui Property Fund, which aims to raise THB 828 million for an investment in the Samui Buri Resort, is scheduled to be listed in August, with an expected guaranteed return of over 6% for the first five years. Elsewhere, MFC Asset Management plans to launch a THB 1.5 billion storage fund and THB 2.0 billion office fund this year, both of which would provide expected annual return of 7.8%. Thanachart Securities has also indicated its intention to launch a property fund in the second half. The fund would have an asset value of THB 1.5 billion to THB 2.0 billion and expected return of 7%-8% per year. REIT PERFORMANCE DATE OFFER PRICE CLOSING PRICE % CHANGE 52-WEEK HIGH 52-WEEK LOW DISTRIBUTION NAME OF REIT LISTED (THB) 30 JUN 10 (THB) SINCE DEC 09 (THB) (THB) YIELD (JUN 10) UOB Apartment Property Fund I (Leasehold) 29-Oct % * Bangkok Commercial Property Fund 19-Nov % % Millionaire Property Fund 08-Mar % % Ticon Property Fund 12-May % % ING Thai Industrial Fund 1 29-Jun % % MFC-Nichada Thani Property Fund 11-Aug % % CPN Retail Growth Leasehold Property Fund 23-Aug % % Baan Sansiri Property Fund 26-Sep % % Samui Airport Property Fund 24-Nov % % T.U. Dome Residential Complex Property Fund 06-Dec % % Future Park Property Fund 07-Dec % % Quality Houses Property Fund 12-Dec % % JC Property Fund 05-Jan % % Gold Property Fund (Leasehold) 22-May % % Major Cineplex Lifestyle Leasehold Property Fund 18-Jul % % Urbana Property Fund (Leasehold) 18-Oct % % Property Perfect Property Fund 20-Mar % % Quality Hospitality Leasehold Property Fund 03-Apr % % Luxury Real Estate Investment Fund 29-Apr % % Multi-National Residence Fund 19-Jun % % Centara Hotels & Resorts Leasehold Property Fund 13-Oct % % Nichada Thani Property Fund 2 31-Mar % % Sathorn Property Fund 10-Aug % * MFC-Strategic Storage Fund 11-Aug % %** 101 Montri Storage Property Fund 14-Aug % %** TPARK Logistics Property Fund 16-Dec % %** Thai Commercial Investment Fund 16-Jun %^ * No distribution was declared in the past 12 months ** Annualized distribution yield ^ Change over offer price

13 MARKET SNAPSHOT 13 MALAYSIA The Malaysian REIT market performed in line with the Malaysian stock market in the first half of 2010 and its market cap-weighted average price record a 3.4% increase. UOA REIT, Hektar REIT and AmFirst REIT enjoyed substantial price increases of over 10% while the office REIT Quill Capita Trust was the only M-REIT to see its share price fall which it did so, by 6.5%. The annualised average dividend yield was steady at 7.8% as of June 30 and the spread over 10-year government bonds stabilised at 386 bps. Among the 12 listed M-REITs, Al-Aqar KPJ REIT paid the highest annualised dividend yield of 10.7%. M-REIT IPO launches were a hot topic at the end of the second quarter with Sunway REIT (SunREIT) and CapitaMalls Malaysia Trust (CMMT), two of the largest M-REITs, finalising their plans to hold IPOs. SunREIT was the first to proceed with its IPO, raising proceeds of RM 1.47 billion (US$453 million) in late June. The IPO s estimated market capitalisation was about RM 2.6 billion and the first trading date was scheduled on 8 July The M-REIT holds three shopping malls, including the popular Sunway Pyramid Mall, three hotels and two office properties, and has a total portfolio appraised at RM 3.7 billion. CMMT, the largest pure retail M-REIT, comprises three shopping malls in Kuala Lumpur, Selangor and Penang with a net lettable area of 1.88 million sf and an appraised value of RM 2.13 billion. CMMT reportedly raised proceeds of almost RM 850 million (US$262 million) from its IPO and began trading on 16 July Buying activity also revived in the first half of the year. Major deals included Amanahraya REIT acquiring Selayang Mall, a six storey shopping complex, for a consideration of RM 128 million. Amanahraya also acquired an office building, Dana 13, for RM 99 million. In March, Al-Aqar KPJ REIT announced plans to purchase six property assets including two hospital buildings in Indonesia for a total consideration of RM 303 million. Elsewhere, Axis REIT acquired two industrial properties, namely Axis PDI Centre and Axis Technology Centre in Selangor, for a total cash consideration of RM 134 million. In April, Starhill REIT announced that it would restructure its holdings, and it did so by disposing of two of its downtown retail properties, namely Lot 10 and Starhill Galleria, to Singaporelisted Starhill Global REIT via a special purpose vehicle, Ara Bintang Berhad for RM 1,030 million. The interparty transaction was approved by the M-REIT s unitholders in June. Upon completion of the transaction, Starhill REIT repositioned itself as a global hospitality REIT with the JW Marriott Hotel Kuala Lumpur and the Ritz-Carlton Kuala Lumpur in its portfolio. REIT PERFORMANCE DATE OFFER PRICE CLOSING PRICE % CHANGE 52-WEEK HIGH 52-WEEK LOW DISTRIBUTION NAME OF REIT LISTED (RM) 30 JUN 10 (RM) SINCE DEC 09 (RM) (RM) YIELD (JUN 10) Amanah Harta Tanah PNB 28-Dec-90 N/A % % Axis-REIT 3-Aug % % Starhill REIT 16-Dec % % UOA REIT 30-Dec % % Tower REIT 12-Apr % % Al-Aqar KPJ REIT 10-Aug % % Hektar REIT 4-Dec % % Amfirst REIT 20-Dec % % Quill Capita Trust 8-Jan % % Al-Hadharah Boustead REIT 8-Feb % % Amanahraya REIT 26-Feb % % Atrium REIT 26-Mar % %

14 14 REITS AROUND ASIA 1H 2010 ASIAN REIT LEGISLATION OVERVIEW JAPAN Singapore HONG KONG South Korea Taiwan Thailand Malaysia Structure Trust or corporate (listed REITs are all corporations) Collective investment scheme (Unit trust) or corporate Unit trust Corporate-Restructuring, Entrusted Management, Development-Specialised, Self-Managed Trust (Real estate asset trust or investment trust) Closed-end mutual fund Unit trust Management structure External External Internal/ External Internal/ External Internal/ External External External % invested in real estate For listed J-REIT, at least 75% of assets must be invested in real estate At least 70% of deposited property should be invested in real estate or real estate-related assets Only invest in real estate At least 70% in real estates or corporate restructuring related properties Cash, government bonds, property, property-related rights, beneficiary securities or ABS issued under Real Estate Securitization Act/ Financial Asset Securitization Act (RESA/ FASA) must form at least 75% of the NAV Must invest at least 75% of NAV in property At least 50% of a fund s total asset value must be invested in real estate and/or singlepurpose companies at all times Geographical restrictions No restriction under the Investment Trust and Investment Company Act, but no overseas acquisitions have been made as the requirements on real estate appraisal of overseas properties are ambiguous. No No No No restriction under the RESA; subject to approval Thailand only No restriction basically, subject to approval from SC and relevant authorities Property developments Restricted at least 50% of total assets are income producing and unlikely be sold within one year Property developments and investments in uncompleted projects should not exceed 10% Prohibited, but H-REIT may acquire uncompleted units comprising less than10% NAV Allow Allow for urban renewal, infrastructure or public amenities construction; investments should not exceed 30% of NAV May acquire properties over 80% completed but prohibited to invest in dormant land (for PFPO) Prohibited, but may enter into conditional forward purchase agreement Leverage No restriction Over 35% of total assets permitted with disclosed credit rating (capped at 60%) Capped at 45% of gross asset value REITs are permitted to have exceptional borrowing up to 1000% of equity capital, upon special approval of shareholders Ratings of twaa or above by two credit rating agencies: 50%; ratings of twa or above: 35%; those with credit ratings: 25% Not more than 10% of NAV 50% of total asset value (revised from 35%) Dividend payout At least 90% of distributable income to qualify for tax deduction At least 90% so as to enjoy exemption from paying corporate tax At least 90% of annual net income after tax At least 90% At least 90% of distributable income At least 90% of net profits Not specified in the M-REIT guideline