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The ratings agency S&amp;P forecasts real estate investment trusts should expect a slowing in the tightening of capitalisation rates despite more offshore capital investing in Australia.
S&amp;P's outlook for property is in its report titled "Asia-Pacific REITs' Large Buffer Will Bear A Downturn". 
S&amp;P analysts Craig Parker and Graeme Ferguson noted the spreads between bond yields and property capitalisation rates were at their widest historically.
It noted rents for Australian commercial property having seen "sluggish growth,"
But capital inflows looked set to continue this year for the REITs.
"The major commercial real estate markets of Australia, Hong Kong and Singapore are experiencing subdued rental growth, offset by substantial capital appreciation partly because of buoyant investment flows," they said.
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S&P tips tightening REIT cap rates

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Charter Hall Group (ASX: CHC) is preparing to list on the ASX a new real estate investment trust (REIT) that aims to invest in office, industrial and retail properties across Australia.
Charter Hall Long WALE REIT will comprise an initial portfolio of 66 properties independently valued at more than $1.2 billion. Long WALE REIT will invest in Australasian properties that are leased to corporate and government tenants on long term leases, said a media release.
It expects to file for the IPO with ASIC on September 27.
Charter Hall's managing director and Group CEO, David Harrison said: “The REIT will have a market capitalisation in excess of $1 billion and Charter Hall will have a co- investment of up to $250 million. At IPO the REIT will target no debt on balance sheet and look through gearing of less than 20%.”
He said Long WALE REIT's objective is to provide investors with stable and secure income. 
The REIT will target the distribution of 100% of operating earnings and expects to provide investors with stable, recurring income through quarterly distributions. Growth in distributions is expected to be underpinned by a combination of fixed rental increases and CPI linked rental reviews, the release said. 
Nearly 58% of the income from the initial portfolio is subject to fixed rental increase, while the balance of income, about 42%, is subject to rental reviews linked to CPI. The weighted average rental review across the initial portfolio is estimated at 2.8%.1 
Charter Hall has established Charter Hall WALE Limited as the responsible entity of the REIT. The fund would be managed by Avi Anger.
Charter Hall has a successful track record in investing, having done deals worth $12.6 billion in the last five years, which include $3.3 billion in divestments.
J.P. Morgan Australia Limited and UBS AG, Australia Branch are the joint lead managers for the IPO with King and Wood Mallesons the legal advisor.
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Charter Hall plans to list $1.2 billion REIT on ASX 

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ASX-listed real estate investment trust Viva Energy REIT (‘VVR’)  said it had acquired eight service station properties for $89.1 million, excluding transaction costs.
The service stations are in Victoria, Queensland, NSW and NT, it said. 
The REIT said in an ASX announcement that it was raising equity to fund the acquisitions.
The capital raising includes $80 million in fully underwritten Institutional Placement with a non-underwritten Security Purchase Plan (‘SPP’) of up to $10 million to follow.
It said all new securities have full entitlement to the distribution for the six months ending 30 June 2017.
Commenting on the acquisitions, Margaret Kennedy, managing director of VER Manager Pty Ltd, manager of VVR, said the new properties would further diversify its portfolio.
In addition,  Viva is currently undertaking due diligence on 10 properties valued at about $45 million.
VVR also announced it had recently secured an additional $60 million, three-year bilateral debt facility from an existing lender. VVR has nearly $135 million of debt capacity available to fund future acquisitions. 
<a href="https://www.propertyobserver.com.au/images/2017/06/26/VivaEnergy.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/06/26/VivaEnergy.png" alt="">
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Viva Energy REIT to acquire eight service stations across four states for $89.1 million

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Wealth management group Fat Prophets is set to launch a listed investment fund with a global focus on real estate investment trusts around the world in a bid to diversify from the local sharemarket, which has dropped 9 percent over the past month.
The group, which has offices in Sydney, London and Auckland, seeks to raise up to $220 million, according to The Australian.
The S&amp;P/ASX 200 A-REIT index has taken a 9 percent hit in the past month as investors fret about a property market slowdown and the negative commentary around it, besides weak wages growth in retail and the looming entry of Amazon.
Fat Prophets said it would allow Australian investors access to global REITs, which would otherwise require direct investing in international markets or unlisted funds.
“This new fund provides Australian investors the opportunity to diversify their equity holdings in REITs outside of Australia,” Fat Prophets chief executive Angus Geddes was quoted as saying by The Australian.
“They can now have an interest in the entities that own, manage and develop some of the most iconic assets around the world.”
The portfolio will be managed by Simon Wheatley, a real estate veteran with more than two decades of experience in listed real estate.
Fat Prophets said the fund could help investors reduce volatility in their portfolio. 
The LIC structure would likely provide more liquidity than a direct real estate investment, with much lower entry and exit costs, they said. 
The fund will be actively managed, typically holding 70 to 90 securities, with the ability to hold up to 15 percent in cash.
Units are on offer for $1.10 each, with the offer closing on September 1 and units to start trading on the ASX on September 13.
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Fat Prophets floats REIT-focussed listed fund

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Centuria Metropolitan REIT, Australia’s largest metropolitan office REIT, announced its inclusion on the S&amp;P/ASX 300 Index from the start of trade on September 18.  
The S&amp;P/ASX 300 Index includes up to 300 of ASX-listed entities by float-adjusted market capitalisation and provides a widely-used benchmark for many general equities and real estate specific institutional investors.
“We have previously indicated it was our goal to be included in the Index. We’re delighted to have achieved this milestone, thanks to the support of our securityholders,” said Nicholas Blake, trust manager of the REIT.
“Inclusion in the index will enhance CMA’s relevance within the Australian equity market and generate increased institutional investor interest.”
The ASX inclusion caps an eventful year for the real estate investment trust. It  merged with Centuria Urban REIT (CUA), posted a statutory net profit of $37.7 million in the financial year 2017, and also completed a $90 million capital raising, increasing CMA’s market capitalisation to over $500 million.
Recently, the REIT <a href="https://www.urban.com.au/expert-insights/investing/73048-centuria-reit-buys-three-office-assets-in-perth-and-melbourne-for-150-million" target="_blank">bought three commercial properties</a> in Perth, one of them being the Hatch building (below) and Melbourne for a total of $150 million. 
Centuria Group entity Centuria Industrial REIT (ASX: CIP) is included in the S&amp;P/ASX 300 Index, while Centuria Capital (ASX: CNI) is a potential candidate for inclusion at a future rebalance.
“The inclusion of the REIT in the ASX/S&amp;P 300 Index is an important milestone for CMA, which was launched in December 2014. Combined with our $1.6 billion unlisted property syndication business, we now have three distinct property investment platforms that can grow independently. This enhances the group’s overall growth prospects,” said Group CEO John McBain. 
 
 
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