Being what it is - a trading, investment banking
and tourism hub, commercial real estate in Singapore is a major exposure
for most commercial banks. Therefore, unsuprisingly, securitisation
in Singapore has mostly been focussed around the commercial real estate
sector.Outstanding loans against commercail real estate by commercial
banks and financial institutions stood at Sing $ 72.2 billion as of
March 2003, which is 42% of the total loans and advances by financial
With the introduction of REITs, activity focussed
on CRE became all the more prominent.
Capital market funding into commercial real estate
in Singapore has taken 3 forms - mortgage backed bonds, CMBS and REITs.
Mortgage-backed bonds are traditional on-balance sheet funding instruments.
REITs are ownership-based instruments that securitise
the ownership of a commercial real estate. REITs are typically listed
and the market value of REIT units appreciates/moves along with the
market perception of the value of the real estate. REITs may achieve
further yield enhancement by combining a securitisation structure with
a REIT - as has been done in some of the recent transactions.
Securitisation of the famous Raffles complex in
2001 marked one of the significant CMBS transactions in Singapore. Fitch,
which recently rated a REIT-securitisation transaction named Orion Prime
has listed several CMBS deals in Singapore, as under:
- Silver Maple 2002
- Silver Maple 2003
- Silver Loft
- Silver Maple 2004
- Platinum AC1
The REIT activity in Singapore picked up with offerings
by CapitaMall Trust (CMT) and Ascendas REIT (A-REIT) - both of which
received overwhelming support. Currently there are 5 REITs listed on
the Singapore stock exchange. Fortune REIT relates to properties in
Hong Kong but has listing on Singapore exchange. CapitaCommercial relates
to commercial properties in Singapore.
Securitisation by REITs has emerged as a unique
way out for the leveraging limit put in by MAS regulations on REITs.