Henderson Global Partners, which manages $2.3 billion in property stocks, is targeting to raise as much as $100 million this year for a new fund that will invest in real estate investment trusts around the world.
The money manager expects to raise at least $50 million this year for the Henderson Global Property Income Fund domiciled in Singapore, said Patrick Sumner, head of property equities at Henderson. The company is targeting retail investors in the island state for the fund, he said.
Real estate investment trusts have outperformed global equities and government bonds over the past three years, according to Henderson Global. Global REITs returned 30 percent annually in the four years since 2009, compared with a 6.3 percent return by bonds and 20 percent gain in equities worldwide, data compiled by Henderson showed.
“REITs have an extremely competitive cost of capital,” London-based Sumner said in an interview in Singapore on April 9. “Both equity and debt is the lowest in the modern history of REITs and this gives them an enormous competitive advantage against the other investors in the sector, be it private equity or institutional investors.”
Investments in the U.S. make up about 44 percent of the property fund, followed by Singapore at 23 percent, Sumner said. The rest are spread across Europe, Canada and other parts of the Asia-Pacific region, he said.
Revenue from U.S. REITs is growing as the economy recovers stronger than people had expected, Sumner said. The U.S. economy could grow 2.5 percent this year compared with earlier forecasts of growth between 1.5 percent and 2 percent, he said.
The spread of as much as 4.5 percentage points from the city’s bond yields make the REITs in the city state an attractive investment, Sumner said. The fact that they are also tax free make them “the most attractive REIT structure in the world,” he added.
Singapore’s property trusts were the second-best performers in Asia in the past year and the biggest fundraisers in the city’s initial public offering market in the same period.
The REITs raised S$3.4 billion ($2.7 billion), or 68 percent, of the S$5 billion of stock sold in Singapore IPOs in the past 12 months, according to data compiled by Bloomberg. The biggest share sale was the S$1.6 billion raised by Mapletree Greater China Commercial Trust, a REIT that owns assets including the Festival Walk shopping mall in Hong Kong and an office complex in Beijing.
The measure tracking REITs in Singapore rose 37 percent in 2012 and has gained 8.6 percent so far this year, data compiled by Bloomberg showed.
Sumner forecasts Singapore REITs to return about 10 percent to 12 percent this year and targets the Henderson fund to pay out about 5 percent to 6 percent on a quarterly basis, he said.