Bangkok--11 Jul--Fitch Ratings
Thai commercial real-estate developers' increasing need for funding and the potential growth of REITs were discussed during Fitch Ratings (Thailand) Limited's semi-annual "Property Investment Outlook" briefing today. The conference also highlighted Fitch's criteria on commercial-property companies and REITs to help investors better understand this rapidly developing market segment.
The growth in new supply of commercial and retail space in Thailand over the next few years will increase competition in the retail real-estate sector and developers' funding needs, noted Miss Nichaya Seamanontaprinya, Associate Director of Fitch's corporate ratings team. Bond issuance by the commercial-property sector has been low, with outstanding bonds of about THB40 billion, or 1% of the total, at June 2018. Fitch expects debt funding, including bond issuance, from commercial developers to increase in the medium term due to several large mixed-use projects in the pipeline. This could result in higher leverage and oversupply if economic growth weakens.
Guest speaker Mr Yingyong Nilasena, Deputy Secretary General, Fund Management Group, Government Pension Fund, highlighted the benefits of investing in commercial real estate through property funds and REITs as they tend to have more stable cash flows, low entry costs for smaller investments and ease of asset and geographical diversification. The business needs substantial scale to diversify sufficiently and requires significant management expertise, he added. Investors should start by developing a model portfolio, followed by individual fund selection, Mr Yingyong noted.
The conference brought together more than 100 corporate treasurers and bankers, insurers, asset managers and regulatory officials.