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In a bid to make S-Reits be more competitive against private capital and foreign Reits when making real estate acquisitions, the Monetary Authority of Singapore revealed in July plans to increase S-Reits’ present leverage limit of 45 percent.
Market observers revealed that Singapore real estate investment trusts (S-Reits) have been increasing their acquisitions worth billions of dollars, on the back of a lower-for-longer interest rate environment, reported The Business Times.
In this week alone, three S-Reits announced equity financing to partially fund acquisitions.
Manulife US Reit said it plans to raise US$142.1 million (S$195.8 million) to finance its US$198.8 million (S$273.9 million) acquisition of a Class A office building in Sacramento, California.
Mapletree Industrial Trust (MIT) raised S$400 million to acquire a US$1.4 billion (S$1.9 billion) data centre portfolio together with Mapletree Investments.
Lastly, Keppel DC Reit secured S$478.2 million to fund the proposed acquisition of two data centres worth around S$587 million.
In July, CapitaLand Commercial Trust conducted a S$220 million placement in order to pay for its €133.4 million (S$205.3 million) acquisition of a German office building.
“S-Reits have been on an acquisition trend this year due to conducive market conditions, with a prolonged low interest rate environment benefiting Reits in terms of greater investor appetite for yield instruments and access to cheap funding costs,” said Vijay Natarajan, RHB Securities Singapore property analyst.
“As many of the Reits are trading at a premium to book value, they are also able to do accretive deals both to their DPU (distribution per unit) and NAV (net asset value), which benefits stakeholders,” he added.
Maybank Kim Eng analyst Chua Su Tye sees “acquisition growth levers arising” for the sector as the Monetary Authority of Singapore (MAS) wants feedback on its proposal to raise the leverage limits for S-Reits.
In a bid to make S-Reits be more competitive against private capital and foreign Reits when making real estate acquisitions, the MAS revealed in July plans to increase S-Reits’ present leverage limit of 45 percent.
“S-Reits have acquired overseas for diversification and growth, yet maintain strong balance sheets. An increase in leverage from 45 percent to 50 percent raises debt headroom by 10-14 percent for AUMs (assets under management), and opportunities for DPU-accretive deals,” Chua said.
Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email victorkang@propertyguru.com.sg