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Ciputra awaits for lower interest rate before announcing REITs
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A landmark of Ciputra Development in Ciputra Hanoi International City, Vietnam. The developer group, awaiting a further cut in the benchmark interest rate, is eyeing to securitize its assets into real estate investment trustees (REITs). (Courtesy of www.ciputra.com/-)
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ublicly listed developer Ciputra Development is looking at the possibility of securitizing its assets into real estate investment trustees (REITs), although it is waiting for a lower benchmark interest rate before potentially selling the securities to the public.
Ciputra Development finance director Tulus Santoso Brotosiswojo said the yields of bank deposits and government bonds (SUN) currently was around 8 percent while the REITs yielded around 7 to 10 percent, which was less attractive for new issuances.
"Currently the yields of REITs are not attractive enough or less competitive than that of bank deposits or SUN. We expect that a further cut in the interest rate will spare a bigger spread for REITs and make it more attractive," he told thejakartapost.com in Jakarta on Monday.
The group, he further explained, had potential assets of Rp 15 trillion (US$1.1 billion) that would be securitized into REITs. It consists of shopping malls, hotels, office towers, and hospitals with stable recurring incomes.
"It depends on the market. Maybe we will issue Rp 1 trillion first, and then if it is possible we will add Rp 2 trillion more. The most important factor [in issuing REITs] is the availability of buyers," he said.
According to Indonesian Real Estate Association (REI) researcher Rengganis Kartomo, the property securitized into REITs should be mature ones with a steady recurring income that provide stable dividends.
With stable returns, he predicted that REITs would mostly attract pension funds that are used to providing more frequent dividends. "It is suitable for pension funds and hopefully the REITs issuers will make it affordable for retail investors," she said. (ags)
