The regional real estate investment trust craze has finally sired a pan-Asian Reit, driven from Australia, and to be listed in Singapore. Despite its billing however, Allco Commercial Reit currently boasts just three assets: an office tower and shopping mall in Singapore, a stake in an office in Perth and a minority stake in an existing Australian property fund managed by the same group. That hardly qualifies for the title pan-Asian Reit but the proposed $300 million plus proceeds will certainly provide the capital to acquire more properties. The key to the success of the deal will therefore be whether investors believe the deal’s sponsor, Allco Finance Group, has the ability to find and close sufficient deals to warrant the fund’s pan-Asian billing.
Asian investors’ appetite for Reits shows little sign of abating: yields on existing issues have been increasingly suppressed as they chase the sector. Only Macquarie’s International Real Estate Fund, a kind of Reit of Reits concept, pushed things too far. Investors saw through that structure and the deal was canned earlier this year after weak demand. If investors keep clamouring for fresh product, Macquarie may try again. That might be the signal to short the sector.