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Business trust listings on the rise in Singapore

There has been a growing range of unusual investment options -- largely made available through business trust listings -- ranging from golf courses and overseas shopping malls to data centres.

SINGAPORE: Singapore is Asia's biggest trust listing destination, with around 50 real estate investment trusts (REITs) and business trusts to date in the Singapore market and a combined market capitalisation of roughly US$60 billion.

There has been a growing range of unusual investment options -- largely made available through business trust listings -- ranging from golf courses and overseas shopping malls to data centres.

Croesus Retail Trust -- which owns six malls in Japan -- says it is able to offer investors a more competitive pay-out structure by listing as a business trust in Singapore.

"Since Mr Abe took office, there's been a lot of renewed interest in Japan, so just on that itself, there's been a lot of interest in our retail trust,” said Jeremy Yong, co-founder and group managing director of Croesus Retail Trust.

“Now on top of that…, for the same exposure to the retail real estate space, our comparable J-REITs in Japan are 3.5 per cent to 4 per cent. At our current price, we're paying, on a forecast basis, (around) the high-sevens."

Like REITs, business trusts pay dividends out of cash flows rather than from accounting profits, making it an attractive fund-raising structure for infrastructure firms such as port operators -- which generate a steady income from fees, but hold depreciating assets that suppress accounting profits.

But business trusts differ from REITs in that it does not face caps on debt gearing or on how much assets under development it can hold.

Analysts say this means investing in business trusts carries relatively more risk than in REITs, and investors should demand a higher yield. Singapore-listed REITs have an average annual yield of six per cent.

"If you're looking at golf courses, data centres, you'll really need to look into the contractual details of some of the arrangements -- how consistent and how stable the income is going to be -- and what are the clauses, because they might have contracts where tenants are allowed to terminate early, so I think the risk is much higher. And you'll really need to study it carefully," said Jack Wang, partner of Lexico Advisory.

Recently, Indian toll road operator Larsen & Toubro shelved its plan to list a business trust in Singapore.

But analysts say there are many more trust listings being planned including one by Japanese golf course operator Accordia.

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