Get more exposure to Asian REITs that have more value, fund managers say
Asian real estate investment trusts and property funds are providing better returns than some of their Australian and global counterparts because they offer a lot of untapped value, Asian fund managers say.
Australian investors were not “penetrating” the Asian markets enough especially at the dealer group level, with many still overcautious about Asian REITs and stocks, Premium China Funds Management’s Simon Wu said at SQM Research’s property forum in Sydney on Wednesday.
His firm’s four Asian funds have had low double digit annual gains since their inceptions between six and nine years ago. The Premium Asia Property Fund – 60 per cent in Asian real estate or large conglomerates and 31 per cent in Asian REITs – has returned 12.6 per cent a year over nine years.
“The Asian property group is the best value based on our research. It is currently being offered at a 48 per cent discount to its net asset value,” he said.
With REITs, the best value ones were those listed in gateway Asian cities such as Singapore, Hong Kong and Japanese cities, APN Property Group’s Corrine Ng said.
Asian REITs have an advantage over US and Australian REITs because being “young” – they were first issued in 2001 – they were able to combine best practices from the US and Australia.
‘Trade at huge premiums’
“They structured their REITs so they pay passive vanilla rents, quite different to AREITs,” Ms Ng said.
“They trade at huge premiums…you have Singapore and Hong Kong [REITs] at a slight discount, so there is still value there.
“And the quality of assets you get out of an [Asian] REIT portfolio is much like what you get here in Sydney and Melbourne.”
APN’s Asian REIT fund has had a 20.7 per cent annual return over five years.
Asian REITs also had future potential growth through IPOs, emergence of new REIT markets in China, India and the Philippines and exposure to broader, high quality commercial property asset pools, Ms Ng added.
But REITs aside, direct Asian conglomerate stocks had provided more value than Asian REITs, Mr Wu said.
Undervalued stock
Shimao, a $US3.9 billion conglomerate with a large property portfolio including some in Australia, is an example of an undervalued stock.
“We love it,” Mr Wu said.
“The company owns 29 hotels across China, and 40 projects all over China. The hotel properties they own, including the Royal Meridian…are carried in their books at cost minus depreciation with no increase valuation.
“Its valuation is undervalued by $US1.5 billion.
“That said there are 50,000 Chinese developers across the country so there are a lot of bad apples there. You need to have a fund manager analyse these companies and even count their units to be sure their report is correct.”
