While the title may sound contradictory, it reflects a deeper reality. Reading and researching about the Singapore REIT sector and how, over the years, retail investors have suffered substantial losses, it dawned onto me the reality of investing in Singapore.
The Lippo Playbook- Enriching Themselves not Singapore Investors
The Lippo Group owns stakes in several SGX-listed REITs, many of which now trade well below their IPO prices. The recurring pattern is familiar:
Properties are sold by the parent company into a Singapore-listed REIT at high valuations, often supported by temporary income support guarantees. These guarantees help justify the valuation during the IPO or acquisition phase. However, once the income support expires, the underlying performance of the assets frequently fails to meet expectations.
The REIT is then left servicing high levels of debt incurred to fund these acquisitions—without the corresponding cash flow to support them. Over time, this results in declining book value, falling unit prices, and permanent capital loss for unitholders.
A prominent example is Lippo Malls Indonesia Retail Trust, which has lost approximately 98% of its share value since IPO. While retail investors bore the losses, the Lippo Group profited handsomely through property divestments and years of management fees.
Where Is the Skin in the Game?
This raises a broader issue: the lack of meaningful alignment between REIT sponsors, managers, and retail investors.
In my view, the Monetary Authority of Singapore has failed to adequately address this structural flaw. The lesson learned by many REIT managers appears to be that they can take excessive risks, while losses are ultimately and majority absorbed by unitholders.
Take Manulife US REIT as an example. Manulife originally owned 100% of the assets but spun it off into the REIT and reduced its stake to below 10% at IPO to meet regulatory requirements. Meanwhile, Manulife continued to earn management fees while operating on a leverage of 10:1with other people’s money. So it only had less than 10% of its original capital at risk. Too much risk was then taken by the REIT manager post IPO through its acquisitions, while employing this strategy of shifting ownership from 100% to 10:1 leverage on "other people money"
The Lippo Group has followed a similar strategy: repeatedly diluting investors while selling assets from the parent company to the listed REIT at valuations with little margin of safety. Comparable behavior has also been observed among Singapore blue-chip sponsors, including Keppel.
The Captive Buyer Problem
In Singapore, a listed REIT effectively becomes a captive buyer for its sponsor.
A parent company can sell a building it previously owned outright to a child REIT in which it holds only a 10–30% stake. Yet it retains control through the REIT manager, continues to earn management fees, and benefits from leverage funded primarily by retail investors.
This asset-light model is immensely attractive to sponsors: profits are privatized, risks are socialized. When things go well, sponsors earn fees and crystallize gains; when things go poorly, it is the unitholders who suffer most of the losses.
Why Low Price-to-Book REITs Stay Cheap
When a REIT trades significantly below book value, two explanations typically apply:
(1) The valuations are wrong.
In several cases, properties are eventually sold at prices far below their stated appraised values at each financial year end. Prior to the sale, the REIT conveniently revises its valuation downward to justify the transaction—despite both valuations being conducted only months apart.
(2) The valuations are right, but managers refuse to act.
In theory, a REIT trading at 0.5–0.6x book value could unlock enormous value by selling assets and using the proceeds for unit buybacks. This would reduce leverage, strengthen the balance sheet, and potentially deliver significant gains to remaining unitholders.
In practice, this almost never happens.
Why? Because selling properties reduces the asset base—and with it, the management fees earned by the REIT manager. While such actions would benefit unitholders, they conflict directly with the economic incentives of the manager, who is often also the largest shareholder or sponsor.
As unitholders, we may focus on mathematical value accretion. But we must remember this fundamental truth: REIT managers （who tend to be related to the Sponsor） are paid to manage assets, not to maximize unit prices. Such example could be seen in how the parent ESR was managing Sabana REIT.
Minority Shareholder Problem Not Just Happening in the REIT Sector
The challenges discussed in this article are not confined to the REIT sector. More broadly, they reflect a structural issue faced by minority investors in Singapore-listed companies.
In many family-controlled firms, controlling shareholders retain decisive influence over capital allocation and executive appointments. It is not uncommon for related parties to be installed in senior management roles with generous compensation, while dividends to minority shareholders remain limited or inconsistent.
Although there have been instances of shareholder pushback at annual general meetings—such as at Stamford Land and Hong Fok—these efforts rarely lead to meaningful change. Minority shareholders, by definition, lack the voting power to alter outcomes when control remains firmly in the hands of founding families.
The existing governance framework in Singapore offers limited practical protection for minority investors in such situations. While disclosure requirements are robust, economic outcomes continue to favor controlling shareholders, often at the expense of long-term minority returns.
This imbalance has broader implications. Weak minority investor confidence contributes to low market participation, persistent valuation discounts, and a lack of depth in Singapore’s equity market—an issue policymakers are now seeking to address. Without stronger alignment between control and capital, reforms aimed solely at boosting listings or liquidity are unlikely to succeed.
