MARKETVIEW GDP improves while investment activities remain limited Thailand Investment, Q3 2020 Q3 2020 CBRE Research | 2020 CBRE (Thailand) Co., Ltd. 1 As of September 2020, the Bank of Thailand (BoT) maintained the policy rate at 0.5% with a more optimistic outlook on the 2020 GDP revising its forecast to negative 7.8% from its previous projection of negative 8.1%. The BoT also adjusted its 2021 GDP growth forecast to an expansion of 3.6%, decreasing by 1.4 percentage points from 5% in the previous forecast. The BoT Committee predicted a slightly smaller contraction in 2020 and a lower expansion rate in 2021 due to low recovery in foreign tourist figures due to the COVID-19 global outbreak. In Q3 2020, there was no publicly announced land acquisition in downtown Bangkok as sales of under- construction projects remained slow and developers focused on clearing their unsold inventory rather than acquiring land for new projects. We believe land prices in prime locations are expected to remain flat due to the uncertainty in the economy and limited investment activities as a result of COVID-19. However, there will still be demand for prime sites, but prices must be realistic. Three investment transactions were reported this quarter. Areeya Property Public Company Limited sold its remaining units in and asset related to A Space Mega Condominium and A Space Mega 2 Condominium to Real Asset Development for THB 1,111 million in order to generate cash flow. Another transaction was between Paradise Park Co., Ltd., a subsidiary of MBK, as the buyer and Bangkok-Tokyu Department Store Co., Ltd. as the seller, with registered capital of THB479 million after Tokyu Department Store closed down at the end of January 2019 with a net loss over the last three years. The last transaction was by Next Point PCL, with total value of THB440 million for a manufacturing warehouse in Samut Prakarn province from Golden Dragon Auto Service Co., Ltd. with total area of 14,283 square meters. There was one joint venture reported in SET between WHA Industrial Development Public Company Limited (49%) and Bangkok Industrial Gas Company Limited (51%) to build a gas- generation plant and pipeline system in Eastern Seaboard Industrial Estate to provide customers with nitrogen under the company BIG WHA Industrial Gas Co., Ltd. Meanwhile, there was no major foreign joint venture reported this quarter. Prospect Logistics and Industrial Leasehold Real Estate Investment Trust (PROSPECT) was the only new REIT listed in Q3 2020. The trust invests in the sub-leasehold rights of parts of land with warehouses and factories in the Bangkok Free Trade Zone with total value of THB 2,450 million. Publicly Listed Property Funds and REITs Average Dividend Yield 5.4% (+0.3 pp y-o-y) 10-Year Gov. Bond Yield (September 2020) 1.42% (-12 bps y-o-y) 1-Year Gov. Bond Yield (September 2020) 0.51% (-89 bps y-o-yMARKETVIEW Q3 2020 CBRE Research 2020 CBRE (Thailand) Co., Ltd. | 2 THAILAND INVESTMENT Meanwhile, there were two planned REITs currently under listing application process, namely KTBSTMR and BGREIT. KTBSTMR invests in sublease rights of land and properties of five projects, which are Rich Asset, ST Bang-bor, ST Bang-pa-in, The Summer Hub, and The Summer Hill; while BGREIT invests in 25-year leasehold rights of Interchange 21 building, which is the office and retail rental space including assets for the operation. There were three REITs with additional investment and expansion this quarter, namely BOFFICE, FTREIT and AIMIRT. BOFFICE has completed the investment in the partial leasehold right of Bhiraj Tower at BITEC and the ownership rights in movable properties for the first capital increase of THB 3,300 million. FTREIT has successfully made additional investments in assets in Frasers Property Logistics Park Sriracha, Chonburi Province with total value of approximately THB 343.13 million. AIMIRT has successfully made additional investment in Chewathai Amata City Project in the investment value of not exceeding THB 460 million by making an investment in the ownership of land with land area of approximately 26-0-73 rai (4.19 hectares or 10.35 acres), and ownership of 10 factories and office buildings with leasable area of approximately 17,120 square meters. Source: Bank of Thailand and CBRE Research, Q3 2020 While 1-year government bond yields remained low, REIT and property funds continued to attract more attention from investors by offering higher dividend yields and capital gain. The average dividend yield for property funds and REIT was 5.4%, increasing 0.3 percentage points y-o-y. Due to the impact of the COVID-19 outbreak, the 12-month capital gain of almost all REITs in Q3 2020 was negative and their closing prices significantly dropped from the previous quarter. This resulted in a total of six REITs only with positive total annual returns (dividend yield + capital gain) this quarter. In Q3 2020, BOFFICE was still the property fund with the highest 12- month trailing dividend yield of 13.8%. It was followed by AIMIRT with 11.5%. However, when combined with the capital gain to determine the total return, some property funds and REITs outperformed others. Samui Buri Property Fund (SBPF) had the highest total annual return of 18.8% in Q3 2020 only from its capital gain with closing price of THB 3.66 in Q3 2020 compared to THB 2.66 in Q3 2019. We believe the office and industrial sectors will recover faster from the COVID-19 outbreak than the hotel and retail sectors due to slow recovery of foreign tourist figures. Figure 1: Government Bond Yields, Q1 2011-Q3 2020 1-Yr Gov. Bond 10-Yr Gov. Bond 0.51 1.42 0 1 2 3 4 5 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Yield (MARKETVIEW QUARTERLY REPORTS THAILAND INVESTMENT All materials presented in this report, unless specifically indicated otherwise, is under copyright and proprietary to CBRE. Information contained herein, including projections, has been obtained from materials and sources believed to be reliable at the date of publication. 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The Bangkok Property Report provides in-depth analysis of the Bangkok real estate market, including property supply and demand, occupancy, take-up, prices, rental trends, and other indicators. CONTACTS FOR MORE INFORMATION ABOUT THIS THAILAND INVESTMENT MARKET VIEW, PLEASE CONTACT: Investment & Land Services, Thailand Kulwadee Sawangsri Executive Director 46 th Floor, CRC Tower All Seasons Place 87/2 Wireless Road, Lumpini Pathumwan, Bangkok 10330 t: +66 (0)2 119 1500 ext 2998 e: Research & Consulting, Thailand Rathawat Kuvijitrsuwan Associate Director 46 th Floor, CRC Tower All Seasons Place 87/2 Wireless Road, Lumpini Pathumwan, Bangkok 10330 t: +66 (0)2 119 1500 ext 2930 e: Research & Consulting, Thailand Onchanok Nawapruek Senior Analyst 46 th Floor, CRC Tower All Seasons Place 87/2 Wireless Road, Lumpini Pathumwan, Bangkok 10330 t: +66 (0)2 119 1500 ext 2933 e: