The coronavirus outbreak may hit Singapore real estate investment trusts (Reits) harder than the 2008 global financial crisis did, according to Jefferies Financial Group.
Singapore announced on Tuesday its strictest measures yet to combat the spread of the virus, including shutting bars and cinemas, and deferring or cancelling events. Public venues such as malls and museums must reduce crowd density to stay open.
Those measures will further test investor appetite for local Reits. With a 23 per cent plunge, a gauge tracking them is heading for its worst quarterly drop since 2008 even though the firms offer the region's highest yields.
Unit prices have tumbled in recent weeks on mounting virus concerns and a sell-everything mentality in global markets.
The trusts have "factored in severe declines" into distribution per unit, but the impact on net operating income might be bigger than during the global financial crisis (GFC), Jefferies analyst Krishna Guha wrote in a note. "Current valuations are not even close to GFC troughs", and the closure of public venues can last longer, the report said.
Leisure and entertainment as a tenant category accounts for an estimated 5 per cent of gross rental income for CapitaLand Mall Trust and Frasers Centrepoint Trust, and up to 13 per cent for Suntec Real Estate Investment Trust, the Jefferies note added.