S-REIT mergers to intensify after OUE deal

Potential merger candidates include trusts worth $1b and below.

Talks of consolidation amongst Singapore’s real estate investment trusts (REITs) are expected to ramp up following OUE Commercial REIT’s proposed merger with OUE Hospitality Trust, according to a report by Bloomberg.

The OUE merger will create a group with $6.8b (US$5b) of assets, including Crowne Plaza Changi Airport, One Raffles Place and Mandarin Orchard Singapore, making it the city-state’s eighth-largest S-REIT.

“The ESR-Viva merger set a template for future mergers,” said Vijay Natarajan, an analyst at RHB Research Institute. “We could see more such mergers of smaller players as the REIT markets still remain favorable.”

Larger REITs have outperformed smaller ones so there may be tie-ups among the smaller industrial and hotel trusts as they seek to consolidate and attract some of the fund flows going into their larger peers, he said.

Potential merger candidates could include some trusts that are below $1b in market value, analysts said.

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