ASIA NEWS: A new avenue

Last month, Country Group Development PCL, a Bangkok-based property developer, launched Thailand’s first international real estate investment trust (REIT) with foreign property holdings.

Trading for the MFC Industrial Real Estate Investment Trust (MIT) listed on the Stock Exchange of Thailand in late December with THB 975 million (€25 million; $27 million) trusts sold at THB 10 per trust unit. According to news reports, the developer plans to increase the value of the MIT to more than THB 1.3 billion in the first quarter of this year. A target yield of around 7 percent has been set.

The first asset to be listed at a valuation of £26 million (€34.1 million; $37.26 million) is a data center in London, according to a statement released by Palmer Capital Asia, the Hong Kong based firm that is the property manager for MIT. Country Group transferred the Anchorage Point in Greenwich – a 24,700 square foot data center it had originally acquired for £20.5 million in February 2015 – to the REIT generating a 15 percent IRR, on the transaction.

The launch of the first international REIT will give an avenue to domestic institutions to increase their nascent exposure to international real estate markets. According to Nicholas Wong, principal of The Townsend Group who has advised Thai institutions on their investment strategies, capital controls have prohibited both public institutions and retail investors from investing money outside the country. Public institutional investors, for instance, can only invest in overseas markets via a local mutual fund formed with a local asset manager.

An increasing number of property developers started to list REITs in the country after the May 2014 military coup restored calm following months of political and economic paralyses. REITs were formally introduced in the country in January 2014, setting the stage for investments in both ongoing and new domestic and foreign income-generating property assets. Many other restrictions on property investments under Thailand’s property securitization structure called PFPOs were also removed.

For retail investors, investing in foreign currency-denominated assets would also help them diversify away from Thai Baht-denominated investments in the home market.

“In case of a mutual fund, the manager is subject to currency swings. But in case of a REIT, the investor is taking the currency risk. A depreciation of the Thai Baht against the British pound, for instance, would help to generate strong income for the retail investors,” said Wong.

Institutions from across Asia have been firming up their overseas investment strategy amid liberalization reforms in places such as China, Japan and Taiwan. Thailand could soon follow suit if international REITs become popular in the country.