Asia REIT Market Insight 2023

2022-2023 ASIA REIT MARKET INSIGHT

3.4 Price to Book (P/B) Ratio

The J-REIT market witnessed a rare fall of P/B ratio to less than 1.0. At the end of 2022, the average P/B ratio of J-REITs was at 0.98, tracking within a relatively narrow range. The highest ratio was in the healthcare sector, led by Healthcare & Medical REIT at 1.42 and followed closely by Hoshino Resorts REIT at 1.31. The latter owns hotel properties and supporting cyclical assets in resort dest inat ions. More than twenty REITs fell within the range of 1.0 to 1.2, while the majority traded in the range of 0.8 to 1.0.

We define P/B ratio as the ratio of the market price per fund unit (based on the market price as of Dec. 31, 2022) to the net asset value per fund unit (the net asset value per fund unit as of Dec. 31, 2022). If the ratio is greater than one, it is at a premium, and if it is less than one, it is at a discount. At the end of 2022, all three major REIT markets presented discounts compared to their net asset values. The Hong Kong market has remained at a discount status for a long time, but the situation became more severe in 2022. Data shows that the average P/ B ratio of REITs in Hong Kong was 0.91 as at their IPO date. As at the end of Dec. 31, 2022, the average P/B ratio of REITs in Hong Kong dropped to 0.45, meaning that the trading price on the secondary market was only 45% of the net asset value, a further drop from last year’s 60%. I n 202 2 , t h e S i ng a po r e ma r ke t exper ienced a reversal and saw a decline in the P/B ratio. The average P/ B ratio of REITs in Singapore was 1.01 as at IPO date, which edged down to 0.96 at the end of 2020, rose to 1.0 at the end of 2021, and then dropped to 0.78 at the end of 2022. Nineteen REIT products had P/B ratios below the average, including Dasin Retai l Trust, with the lowest ratio at only 0.2. The Parkwaylife REIT, in the healthcare sector, presented the highest ratio at 1.6.

P/B ratios for REITs vary greatly by property type. The impact of COVID-19, coupled with global interest rate hikes, caused P/B ratios of mixed-use, office, retail and hotel REITs to drop sharply. In a similar manner as in the previous year, the P/B ratios of hotel REITs in all three markets were at less than 1.0, while mixed-use and office sectors also continued to stay at less than 1.0. In contrast, the P/B ratios of “new economy” assets such as industrial/logistics, healthcare and data center REITs remained relatively high. Average P/B Ratio By Property Type

Figure 12: P/B Ratio by Property Type

2.00

1.42

1.50

Figure 11: P/B Ratio by Market

1.20

1.08

1.07

1.03

1.00

0.96

0.95

1.00

0.90

0.88

1.00

0.80

0.76

0.78

0.98

0.61

0.58

0.57

0.57

0.43

0.41

0.36

0.50

0.45

0.00

Hong Kong, China

Singapore

Japan

综合 工业 / 物流 办公 零售 酒店 公寓 健康医疗 数据中心 Mixed Use Office Industrial/ Logistics Retail Hotel Apartment Healthcare Data Center Singapore Hong Kong, China Japan

Source: Bloomberg Database, Hong Kong Exchanges website, SGX website and Tokyo Stock Exchange website, compiled by Cushman & Wakefield Valuation & Advisory Services

Source: Bloomberg Database, Hong Kong SAR Exchanges website, SGX website and Tokyo Stock Exchange website, compiled by Cushman & Wakefield Valuation & Advisory Services

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