Reits taking steps to cut risk

Singapore's real estate investment trusts (Reits) are being more proactive in reducing risks amid concerns such as the potential oversupply in the local market.

Ms Lynette Leong, chief executive of CapitaLand Commercial Trust, noted there had been "a lot of construction going on, especially in the Marina Bay area", which could add office space supply but added the firm had been preparing for it.

"To reduce leasing risk, we have been doing forward renewals as much as possible," she said.

As a result of renewing leases before they are due to expire, the number of tenants with leases expiring this year is lower than typical years.

"This year we only have about 8 per cent of leases expiring... we typically have 23 to 25 per cent of leases expiring," Ms Leong said.

She was speaking at a Bank of Singapore Investor Forum panel discussion at Fullerton Hotel recently.

Mr Wilson Tan, chief executive of CapitaLand Mall Trust and Mr Low Chee Wah, chief executive of Frasers Commercial Trust, both agreed on the need for "proactive management" given the gloomy outlook.

Mr Tan said there would be factors the Reit is unable to change, such as manpower shortages in the retail sector or fluctuations in tourist numbers. "But we can look at opportunities for asset enhancement... reinvent the space we are in," he said.

In line with strategies of risk reduction, Frasers Centrepoint Trust (FCT) chief executive Chew Tuan Chiong revealed plans to expand into Australia by tapping its sponsor Frasers Centrepoint's (FCL's) presence in the market.

"We believe Australia is a market for us but the barriers to entry are quite high and there are very strong players. We don't think if we just go in and start a few malls, we will survive," said Dr Chew.

"Now we are considering it because over the last couple of years FCL has been able to establish quite a big presence in Australia."

Dr Chew added that it had built up retail competence in the areas of management, leasing and even construction after FCL acquired Australand Property Group two years ago.

"We can't go in due to direct competition, but with help from the group we can back our way in," Dr Chew concluded.

Follow ST on LinkedIn and stay updated on the latest career news, insights and more.

A version of this article appeared in the print edition of The Straits Times on May 16, 2016, with the headline Reits taking steps to cut risk. Subscribe