Brokers' take: RHB says 2021 likely a record year for Reit acquisitions

RHB on Friday said it expects 2021 to be a record year for real estate investment trust (Reit) acquisitions.

This comes as S-Reits (Singapore Reits) announced S$7 billion of acquisitions in the year to date, with a strong pickup of S$5.2 billion in the second quarter, exceeding the analyst's expectations.

The research team maintains its "overweight" call on the S-Reits. Its top picks include Suntec Real Estate Investment Trust, Prime US Reit and Aims Apac Reit.

Suntec Reit units closed 0.66 per cent or S$0.01 higher at S$1.52 on Thursday, Prime US Reit units closed unchanged at S$0.86, while Aims Apac Reit closed 0.64 per cent or S$0.01 higher at S$1.58.

"While office and retail Reits should see short-term outperformance on tactical rotation, from optimism of an economic recovery, we still prefer industrial Reits for earnings resilience," RHB said.

RHB's thesis of a narrowing valuation gap between small-mid-cap Reits and large-cap Reits has "largely materialised". The former has outperformed by 10 per cent in the year to date, compared with large-cap peers which are up 2 per cent.

RHB also expects the recovery pace to pick up in H2 2021 on a stronger economic rebound and positive shift in Singapore's policy stance.

The government's road map for the population to deal with Covid-19, when implemented, will be positive for Reits - especially domestic ones - as it provides more certainty for businesses and landlords.

2021 is also on track to surpass 2019 and 2020's S$10 billion record level of acquisitions. The second half of 2021 is projected to see a climb in market activity from overseas Reit listings. Four Reits are understood to be in the pipeline, RHB noted.