S-Reits: Bigger and bolder over the years

FOR S-Reits, listing on the exchange is the beginning of a journey. Twenty-four S-Reits had announced asset acquisitions valued at over S$15.3 billion and exceeding S$12.7 billion in total purchase consideration in 2021.

Aside from asset acquisitions, S-Reits have also been active in terms of mergers and acquisition (M&A) opportunities. They have seen at least 5 consolidations since 2018 and could be seeing 2 more this year.

The 5 consolidated S-Reits since 2018 are CapitaLand Integrated Commercial Trust C38U (by CapitaLand Mall Trust and CapitaLand Commercial Trust), Frasers Logistics & Commercial Trust BUOU (by Frasers Commercial Trust and Frasers Logistics & Industrial Trust), Ascott Residence Trust HMN (by Ascott Residence Trust and Ascendas Hospitality Trust), OUE Commercial Reit TS0U (OUE Commercial Reit and OUE Hospitality Trust), and ESR-Reit J91U : J91U 0% (by ESR-Reit and Viva Industrial Trust).

Most recently announced on Dec 31, 2021 is the proposed merger between Mapletree Commercial Trust N2IU (MCT) and Mapletree North Asia Commercial Trust RW0U : RW0U 0% (MNACT) to form Mapletree Pan Asia Commercial Trust (MPACT).

The proposed merger is expected to propel the combined entity to be the seventh largest Reit listed in Asia with a market capitalisation of approximately S$10.5 billion.

The combined portfolio will consist of 18 commercial assets diversified across Singapore, China, Hong Kong, Japan and South Korea with assets under management (AUM) of approximately S$17.1 billion (per MCT's AUM as at Sep 30, 2021 and MNACT's AUM as at Oct 31, 2021).

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The proposed merger is expected to be effected by a trust scheme of arrangement with MCT acquiring all MNACT Units in exchange for new units in MCT or a combination of cash and MCT Units.

Reit managers of MCT and MNACT view the merger as an opportunity to bring together 2 leading commercial Reits with highly complementary qualities and see the combined portfolio in providing higher financial flexibility and debt headroom to accelerate its growth and acquisitions.

The new entity is also expected to benefit from the increased representation in key indices and potentially attract a wider investor base and improved trading liquidity.

Another proposed merger in progress is by ESR-Reit and Ara Logos Logistics Trust K2LU : K2LU 0% (ALOG) to form ESR-Logos Reit (E-LOG), with a core focus on new economy real estate.

The combined entity, E-LOG, will hold a diversified portfolio of 87 properties consisting of logistics/warehouse, high-specification industrial properties, business parks and general industrial properties with total assets of approximately S$5.4 billion across Singapore and Australia (as at Jun 30, 2021).

Similarly, via a trust scheme, the proposed merger will see ESR-Reit acquire all units in ALOG in exchange for a combination of cash and new units in ESR-Reit.

Reit managers of ESR-Reit and ALOG have noted that the proposed merger will enhance E-LOG's growth trajectory backed by its sponsor, ESR Group, by providing access to the sponsor's new economy pipeline properties in Asia-Pacific worth over US$50 billion. SGX RESEARCH

• For more research and information on Singapore's Reit sector, visit sgx.com/research-education/sectors for the monthly S-Reits & Property Trusts Chartbook.

Source: SGX Research S-Reits & Property Trusts Chartbook.