Developers to inject more properties into REITs to drive growth

Due to a dearth of thirtd-party assets.

The property market should brace for a wave of capital recycling this year, with more developers expected to inject properties into REITs to drive growth.

According to CIMB, the lack of accretive domestic third-party assets in Singapore could encourage REIT sponsors to inject more properties into their REITs.

CapitaLand, for instance, has completed a number of malls in Singapore and China in the past years. This makes it well placed to benefit from potential recycling activities to its REITs such as CMT and its China mall REIT.

Another developer which could divest properties into its REITs is Frasers Centrepoint, which could explore monetising its commercial properties in Singapore and Australia to FCOT as well as the Sofitel Sydney Wentworth Hotel to its hospitality REIT.

SPH and UEM could also jointly inject the recently-completed Seletar Mall into SPH REIT when it matures.

OUE could also inject One Raffles Place as well as OUE Downtown into OUE CT and OUE HT, while Mapletree Investment’s seeding activities around the Asia region, particularly in Singapore, China and Vietnam, could also provide a stream of properties for its REITs, such as MCT, MLT as well as MAGIC.

“While developers have the option to divest its assets to third parties through a trade sale or off-load to private funds, it can also consider divesting to REITs. We prefer developers with asset pipelines and that can benefit from capital recycling. While some of these are currently under development, they could provide a higher growth profile for these S-REITs when completed and acquired accretively,” stated CIMB.