Ng reckons this trend is likely to continue this year. Already, market watchers including Ng and other analysts are expecting a merger among industrial REITs. The most likely combination is ESR-REIT merging with Sabana Shariah Compliant Industrial REIT given their major unitholders and sponsors are ESR Cayman.
SINGAPORE (Jan 23): Last year, real estate investment trusts proved they remained as bankers’ best friends after raising more than $6 billion in secondary issuance alone, and excluding IPOs. In addition, two REIT mergers were completed. OUE Commercial REIT merged with OUE Hospitality Trust and is listed as OUE Commercial REIT. Ascott Residence Trust (ART) completed its merger with Ascendas Hospitality Trust on Dec 31. The mergers, acquisitions and equity issuances were all driven by the need for size.
“While lower cost of funding has undoubtedly spurred this (M&A and equity raising), we think enlarged market cap and higher trading liquidity considerations have also been significant motivating factors behind this wave of activity,” notes Wilson Ng, an analyst at Morgan Stanley. “The desire to grow larger among REIT managers, especially for smaller names looking to gain entry into the MSCI and FTSE EPRA NAREIT indices, has also manifested in consolidation within the sector, most recently between Frasers Logistics Trust and Frasers Commercial Trust (pending approval), as well as Ascott Residence Trust (ART) and Ascendas Hospitality Trust (A-HTrust) completed in December 2019.”
