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Did you miss the real estate boom?  Do you think it will be years before you’ll find another decent property deal?  Well, if you look beyond your home town and pricey European real estate, you’ll find a property market that offers excellent value.  I’m talking about Singapore. For global investors seeking the best of all worlds, Singapore is probably one of the most undervalued property markets this decade.  A combination of powerful investment factors, including rising income distributions, currency appreciation, a thriving real estate market, and a favorable tax regime all make Singapore one of the best property values in the world right now. Supported by a booming economy, a strong financial services industry and title as the world’s third largest oil-trading center after New York and London, the city-state now sells at its lowest stock market multiple in almost four years.  Over the last five years, Singapore has overtaken Hong Kong as Asia’s fastest growing financial center, including introducing new hedge fund and mutual fund laws, REITs in 2001, and international private banking. But the real story is Singapore’s thriving Real Estate Investment Trust, or REIT industry, offering fatter dividends than the U.S. and the most liberal tax environment in the world. Though Singapore didn’t escape the Asian economic crisis in 1997-1998, the prosperous city-state suffered the least.  That’s because Singapore has historically harbored a low external debt ratio compared to her neighbors’ bulging deficits.  And her low external debt ratio has been accompanied by rising trade and budget surpluses and an undervalued currency. Singapore’s economy is primarily driven by shipping, financial services, technology manufacturing, and tourism.  Gross domestic product (GDP) grew 7.5% in the second quarter after expanding 6.4% in 2005. Inflation is also low at just 1.1% annualized through May.  And the Singapore dollar (S$) ranks as one of Asia’s best-performing currencies over the last 12 months (after the South Korean won).  It’s up 6.5% versus the U.S. dollar. From an investor’s perspective, Singapore is awarded an A-plus.  This small but prosperous nation benefits from its sprawling financial services infrastructure, consumer electronics manufacturing and lucrative concentration of Chinese foreign direct investment.  And unlike some other advanced economies, Singapore’s financial health is excellent. U.S. vs. Singapore REITs REITs remain one of the best-performing investments since the stock market peak in March 2000. REITs typically acquire investment-grade, income-producing properties like office buildings, business parks, shopping malls, hotels, and serviced apartments.  Gross income, which usually is rental income, is consolidated at the REIT level and distributed to investors following a 22% corporate tax rate.  Starting in 2007, all Singapore REITs will attempt to pay out 100% of their after-tax income to unit holders.

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The Strange Disappearance of 100,000 American Millionaires. Last year, the number of American millionaires fell by 100,000.  Yet 200,000 new millionaires showed up overseas.  Why?  Because hugely profitable investments are being hidden from you by a cartel of lawyers, regulators and Wall Street special interests. Like our recommended investments that gained 787% and 1,894% during the bear market and our other investments up 106%, 131% and 169%. Find out what they don't want you to know...

In contrast, the effective yields for U.S. REITs have plummeted over the last five years from 10% in 2000 to the current 4.6%.  And most of these are expensive following a bull market.  With the rising U.S. interest rates and a cooling property market, U.S.-based REITs simply don’t offer the best risk-adjusted values today.  But that’s certainly not the case in Singapore.

In 1999, Singapore enacted its first investment guidelines for establishing Singapore-based REITs.  The market, still small by international standards, is nevertheless now larger than Hong Kong’s REIT industry with a combined US$17 billion in assets.  Compared to Hong Kong’s sprawling REIT market, Singapore REITs are more attractive because 100% of net income is paid to shareholders.  According to domestic REIT laws, all net income must be distributed to investors in order to facilitate pass-through tax treatment.  No other REIT market in the world currently allows the individual investor to receive 100% of his distribution free of corporate taxes.

Singapore’s Oldest and Best REIT Now on Sale Following Correction
Asian stocks have been hit hard since the severe decline in mid-May, but Singapore has declined the least. The benchmark Singapore Strait Times Composite now trades 13% off its all-time high on May 3 and sells at 14.3 times trailing earnings accompanied by a 2.8% dividend yield.

Listed in Singapore, CapitalMall Trust is the city-state’s oldest REIT.  Since its initial public offering on July 17, 2002, CapitalMall Trust has gained a cumulative 132% in U.S. dollars, or 121% in Singapore dollars. Over the same period, the Strait Times Composite has rallied 67% in U.S. dollars.

CapitalMall Trust is literally Singapore’s REIT benchmark.  The company was the first REIT to become publicly-traded four years ago and holds a first-class portfolio of shopping malls throughout the city-state.
Revenue is mainly derived from rental income received from a diverse range of over 1,000 leases in five major shopping malls in both suburban and city areas.  Occupancy rates average over 98.5% for CapitalMall Trust, operating 60% of its malls outside the core Orchard Road shopping district, where rents are high compared to malls located in the suburbs.  The scope for raising rental income continues to grow outside the Orchard Road area, a margin-booster for CapitalMalls Trust.  That adds significant shareholder value because during the Asian economic crisis in 1997-1998, Orchard Road rental incomes plunged 50% while malls in the suburbs saw a much smaller 5% decline.

On July 21, CapitalMall Trust reported another stellar earnings report. Net income surged 29.2% in the second quarter versus Q2 2005 while the unit holders’ distributable income grew 26.1% versus a year earlier.  Cash-flow also improved, rising 14%.

Currently, CapitalMalls Trust yields an effective 5.18% in Singapore dollars - a strong currency not only in Asia but also against the U.S. dollar.  It’s no secret that the United States and the European Union (EU) continue to put pressure on Asian countries to revalue their cheap currencies - including Singapore.  Along with China and several other countries in the region, Singapore continues to harbor an undervalued currency vis-à-vis the U.S. dollar and the euro.  I expect the Singapore dollar to remain strong over the next five years while the American dollar suffers another bear market against most world currencies.

Rising Payout, Fat Dividends
In 2006, CapitalMalls Trust raised its annual distribution by 10.2% compared to 2005’s payout.  Based on the current share price, the company now pays S$0.11 cents per share annually or 5.18%.

The average dividend yield of Singapore-listed REITs is about 3% higher than the yield on a 10-year Singapore government bond.  In most developed markets, that spread is just 1% - a bullish sign, implying Singapore REITs offer a better buying opportunity than their expensive peers.  And compared to U.S. REITs, which now yield just 4.6%, CapitalMalls Trust pays a 13% greater yield, denominated in a stronger currency supported by a healthy national economy.

Plus, Moody’s Investor Services recently assigned a corporate family rating to CapitalMalls Trust, issuing the highest rating ever assigned to a Singapore-listed REIT.  CapitalMalls Trust’s rating reflects its strong leadership in Singapore’s retail mall sector, its position as Singapore’s largest REIT and its impressive recurring income backed with tenant diversification.  In short, it’s the bluest of the REIT blue-chips.

From its all-time high in May of S$2.60, CapitalMalls Trust now trades at S$2.22 a share, or 15% off its high.  The REIT, along with the rest of the stock market, has not been immune to the severe global sell-off since May.  Buying at this entry point makes long-term capital gains, income distributions and currency appreciation an excellent buying opportunity in one of the world’s fastest growing financial centers this decade.

Buy CapitalMalls Trust (symbol CMT) at market on the Singapore Stock Exchange.  Please use the ISIN to place your trade in Singapore. The ISIN code is SG1M51904654. Buy up to S$2.60.

To purchase CapitalMalls Trust, investors can trade through International Assets Advisory Corporation in the United States (1-800-432-4402).  In Europe, members can use Jyske Bank Private Banking in Denmark and Anglo-Irish Bank Austria to trade Singapore stocks.  To track your investment, go to the Singapore Stock Exchange at www.ses.com.sg and click “REITs.”