Fitch Ratings expects property trusts to see more mergers and acquisitions (M&As) in the near-to-medium term, with those trading below their book values likely to become targets of acquisitions.
Under certain conditions, the ratings firm said: “Such M&As could affect the credit ratings of the affected” real estate investment trusts (Reits). “Fitch believes that consolidation of the Singapore Reit market is likely but tempers this view with the knowledge that funding for such acquisitions may become more expensive or difficult to get.”
It noted that despite a relatively-liquid banking sector here, the current woes in the global credit market could affect the institutional real estate market here as many of the participants are either headquartered or have significant business interests outside Singapore.
Reits with foreign sponsors appear vulnerable to mergers and acquisitions or asset divestment, as are those “with small market capitalisations, experiencing difficulty in raising funds for asset expansion or refinancing debt and those also trading at below book value,” Fitch said.
Industrial property player Ascendas yesterday said it will pay $158 million for a 6.28-per-cent stake in Ascendas Reit held by a unit of Australia-based Goodman Group. The acquisition will increase Ascendas’ total unitholding in the Reit from 19.96 per cent to 26.77 per cent.
Allco Commercial Reit said on Sunday that it may sell its Australian assets.
Macquarie MEAG Prime Reit, which has interests in Wisma Atria and Ngee Ann City, said its biggest shareholder, Macquarie Real Estate, received “unsolicited offers” for its 26-per-cent stake. It is conducting a strategic review.
Fitch said that the latter two Reits and several others have their shares trading below book values, spurring discussion about how best “to unlock the shareholder value”.
But those with well-established presence and highly-regarded sponsors, such as CapitaMall Trust, are more likely able to take advantage of current opportunities to acquire assets from other Reits as they are better able to raise funding.
Source : Today – 13 Mar 2008