Property managers go big on Singapore deals

  • Dec 03, 2019
  • Taipei Times

Underpinned by a global hunt for yield, Singapore’s real-estate investment trusts (REITs) are having a bumper year in deal-making, as well as fundraising.

The mantra that bigger is better would continue to drive capital market activity in the sector, analysts say.

Singapore-listed REITs have forked out US$16.9 billion to purchase assets this year, already triple the previous peak reached in 2014.

The sector has also raised a record amount in follow-on share sales, riding an 19 percent gain in the FTSE Singapore REIT Index, which is more than four times the rise in the broad benchmark in the city-state.

The mergers and acquisitions have created some of the largest REITs in the region.

The allure of being big is that an entity would find it easier to gain a place in global benchmarks and portfolios, raise funds for expansion and tackle competition.

For those reasons, expanded companies are better investments for stock buyers.

In the largest deal this year, CapitaLand Ltd spent S$6 billion (US$4.38 billion) to purchase two real-estate units from Temasek Holdings Pte.

In April, OUE Commercial REIT agreed to buy OUE Hospitality Trust to create one of Singapore’s 10 biggest REITs.

Then in July, Ascott Residence Trust and Ascendas Hospitality Trust agreed to create the largest hospitality trust in the Asia-Pacific region, with S$7.6 billion of assets.

The latest deal to emerge involves Frasers Logistics & Industrial Trust, which agreed to buy Frasers Commercial Trust in a S$1.5 billion transaction, according to a statement yesterday.

Analysts at United First and CLSA expect more deals in the coming year, especially among commercial and industrial REITs.

To help facilitate the deal spree, Singapore’s central bank is considering looser debt rules that could spur more acquisitions by property managers, they said.

To finance acquisitions, Singapore REITs have raised a record US$2.8 billion in secondary share sales and US$2.2 billion in initial public offerings this year, according to data compiled by Bloomberg.

Most of these issues were oversubscribed and priced near the the top end of the range.