REIT Financial News - 1 JUN 2010: Moody's revises outlook for S-REITs to stable

Source

SINGAPORE : Credit ratings agency Moody's has upgraded its outlook for Singapore's real estate investment trusts (S-REITs) from negative to stable.

This reflects its view that the sector's fundamental credit conditions over the next 12 to 18 months will remain stable.

Moody's said that the outlook is supported by three factors, which include the strong rebound in Singapore's economy and the stabilisation of rents across the various properties.

Singapore registered a growth of 13 per cent on-year in the first quarter of this year.

Moody's said that most S-REITs saw some improvement in their first-quarter revenue on year.

Since the second half of last year, they have taken action to improve their capital structure.

The decline in acquisitions has also alleviated the need for short-term bridge loans.

On retail, office and industrial properties' rents, Moody's expects slower rent declines.

This comes as tourist arrivals increase, spurring demand for retail space.

Peter Choy, a Moody's vice president and senior credit officer, said: "Although developers are launching a strong supply of office, retail, and industrial properties in Singapore during the rest of 2010 and into 2011, the downward adjustment in rents of the last 12 months has already - and substantially - reflected the coming increase in inventory."

At the end of the first quarter, prime office rents were down 0.7 per cent from the previous quarter.

Grade A office space had registered a slight increase of 1.25 per cent during that same period.

In addition, industrial REITs proved rather resilient throughout the global financial crisis from the fourth quarter of 2008 through 2009.

Moody's said that it believes the recovery in Singapore's manufacturing sector will further reinforce the stability of industrial properties.