Hong Kong trails Singapore amid unfavourable conditions for reits

Hong Kong, a city built by property tycoons as a financial gateway to the mainland, is losing the mainland reit market to Singapore as cautious domestic regulators and unfavourable market conditions prompt mainland property owners to look further afield for listing options.

Real estate investment trusts (reits), which bundle properties for sale to the public via an exchange listing, are relatively new to Hong Kong. The Link Reit was the first to list here with some success in late 2005 but before the market could gain momentum, new issuers turned to Singapore which had listed its first reit three years earlier.

Property companies from across Asia, including those in the mainland that are planning to bring reits to the market, say more flexible regulators and lower interest rates make Singapore the preferred place to list.

'A lot of groups that are looking to list pan-Asian assets are thinking: 'Where do I want to be?' And at the moment it's more attractive to be a Singapore reit than a Hong Kong reit,' said Alastair Gillespie, co-head of Asian real estate research at UBS.

Singapore has so far amassed 16 reits with a market capitalisation of about US$19.3 billion compared with Hong Kong's seven reits presently valued at US$8.8 billion and Singapore's appeal becomes even more obvious when looking at forthcoming listing plans from mainland reits.

Hong Kong's stock exchange is home to two mainland reits: Rreef China Commercial Trust and GZI Reit. Singapore so far has only one reit with mainland assets - CapitaLand's CapitaRetail China Trust. But the next few deals in the pipeline are expected to go to Singapore.