Reits headed for merger wave? Unlikely

OVERSATURATION, tough operating conditions and valuation gaps have fuelled market talk that listed real estate investment trusts (Reits) could soon experience not just their first merger and acquisition (M&A), but even a wave of consolidation.

But targeting the Reit manager is still the preferred route today. Instead of widespread consolidation, the industry is more likely to experience increased privatisations.

In a report last June, Morgan Stanley had predicted that Reit consolidation is likely to occur soon, and will probably be driven by owners of Reit managers in their bid to realise cost synergies in a tougher operating environment.

Actually, Morgan Stanley had expected M&A to happen a different way: through intra-sponsor mergers, whi…