As DBS Group Research sees signs of a gradual recovery in the real estate sector, the brokerage is expecting Singapore real estate investment trusts (REITs) to embark on an acquisition spree.
This could especially be the case for industrial and office REITs, it notes.
DBS says such opportunities will likely stem from their respective sponsors who may look to recycle capital to boost their respective return on equity.
This is supported by low interest rates and higher debt capacity with an enhanced MAS gearing limit of 50%, it adds.
“While managers were focused on battling the impact of the pandemic in 1H20, we believe that S-REITs are now ready to acquire and grow, taking advantage of any potential pricing dislocations in the geographical markets that they operate in,” DBS analysts Derek Tan and Dale Lai write in a note dated Sept 29.
According to DBS, close to $3.0 billion worth of acquired properties have been announced as at Sept 2020.
This compares with $10.2 billion and $10.5 billion worth of properties acquired in 2019 and 2018, respectively.
