Published August 17, 2006

Property firms should go into fund management
UBS' newly appointed exec cites CapitaLand as a good example


PROPERTY companies that can successfully create a fund management platform will be more highly rated than those that do not have one, says Alastair Gillespie, who has been appointed the new co-head of property research for UBS, based in Singapore.

Mr Gillespie will relocate from the bank's Sydney office to take up his new position effective from Sept 4, replacing Charles Neo who resigned in July to join the property hedge fund sector.

Mr Gillespie cites CapitaLand as a good example of a property company that is active in property development across the region and in property fund management. He says property developers who can create a good fund management platform will generate 'better returns on equity, which should lead to higher share prices'.

He says it can be challenging for pure property developers to bring in the people and systems to be successful in property fund management but notes that many Australian players have proved that this can be done.

Mr Gillespie thinks more Asian property developers will go down the property fund management path be it with listed real estate investment trusts (Reits) or private funds, but these companies should be aware of the need to build a long term business. Sponsoring a Reit is 'not about selling assets at high prices to Reit investors', says Mr Gillespie, who adds that there is no evidence of this yet in the Singapore Reit market.

Mr Gillespie says there is tremendous scope for Singapore to attract more foreign properties into Reits here, be they into existing ones or from new Reits owning overseas assets, as Singapore scores well for receptive and flexible regulators.

Looking at the experience of listed property trusts in Australia, Mr Gillespie notes that foreign properties as a proportion of property assets owned by listed trusts in Australia has increased from 10 per cent in 2000 to 40 per cent today. Mr Gillespie looks forward to Singapore applying its takeover code to Reits as is the case in Australia, but thinks the Reit market here is a long way away from entering a phase of consolidation.

He believes takeover activity will only occur when Reits have no more assets to acquire, adding this is hardly the case in Singapore or Asia.

Commenting on Mr Gillespie's appointment, Nicholas Pink, head of Asian research for UBS, said: 'As the securitisation of property assets around the region accelerates - particularly in Singapore - maintaining a leading team in the property sector assumes an ever greater importance to our entire equities business.'