Complete Property Market Updates of Singapore

June 11, 2008

Reit market may see mergers, privatisations

Filed under: General,REIT — Propertymarketupdates @ 2:12 am

AS THE market for listed property trusts in Singapore matures, it is likely that some will merge or go private.

There has been ‘a lot of speculation’ that such movements will take place soon, said experts on real estate investment trusts (Reits) at a regional property conference this week.

There are ‘three to five Reits in Singapore that seem obvious’ for acquisitions or privatisations, said Mr Mark Pawley, the chief executive officer of Oxley Capital.

‘It’s somewhat surprising that we haven’t seen more obvious transactions’ in that direction, he added.

Oxley is a Singapore-based private investment house that focuses on real estate and private equity. It has a stake in the manager of the Cambridge Industrial Trust, an industrial property Reit.

Mr Pawley suggested that one reason the Singapore Reit market has yet to consolidate is that private equity funds, which could help engineer some of these deals, might be ‘all cashed out’.

He was speaking to property players as part of a panel on Reits at the annual Financial Times Asia Property Summit, held at the St Regis Singapore on Thursday.

The topic was ‘Reits: Still a good bet?’ and the answer was, for the most part, yes.

Asian Reit markets reached a peak last October, before they started to feel the effects of the fallout from the United States sub-prime mortgage crisis, said Mr Daniel Ekins, the head of Asia-Pacific real estate securities at Deutsche Bank’s property arm, RREEF.

That was followed by a general sell-off of property trusts until mid-March, which pushed values down by 25 to 35 per cent in each country, he added. Since then, the values of Reits have rebounded by about 10 per cent.

While retail investors are still reluctant to re-enter the market, institutional investors have already started buying Reits, Mr Ekins noted.

‘The turnaround has already started. We’ve seen people coming to our funds who were reluctant to do so in the fourth quarter of last year,’ he said.

‘But retail investors will want to see prices rise 20 per cent before coming in,’ he added.

REASON FOR DELAY IN CONSOLIDATION

Mr Mark Pawley, the CEO of Oxley Capital, said it was ’somewhat surprising’ that there have not been more acquisitions or privatisations of Reits in Singapore.

He suggested that one reason the Reit market here has yet to consolidate is that private equity funds, which could help engineer some of these deals, might be ‘all cashed out’.

Source : Straits Times – 17 May 2008

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