SINGAPORE (Dec 9): On the back of a slew of mergers and acquisitions among Singapore’s real estate investment trusts (S-REITs), UOB Kay Hian believes there could well be more consolidation of smaller S-REITs to come.

See: Size matters: UOB Kay Hian stays buoyant on Singapore REITs sector amid flurry of M&As

“Market cap and trading liquidity are important considerations when sell-side analysts decide on their universe of coverage,” says UOB Kay Hian lead analyst Jonathan Koh in a Dec 4 report. “The prime motivation is to enlarge scale, increase free float and aim for index inclusion.”

According to Koh, here are three potential candidates for merger among S-REITs:

Mapletree Logistics Trust (MLT) and Mapletree Industrial Trust (MINT)

The first exciting prospect is a potential merger between MLT’s logistics properties and MINT’s industrial properties and data centres.

With both MLT and MINT already among the top-10 S-REITs, a merger will be one to look out for.

“Both [MLT and MINT] are liquid, well covered by equity analysts, and are components of the FTSE EPRA/NAREIT Index,” says Koh. “Both S-REITs also have good relationships with banks with low cost of debt at 2.6% and 2.9% respectively.”

ESR REIT (EREIT) and Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (Sabana REIT)

Koh notes that ESR Cayman has cross ownership of the managers of EREIT and Sabana REIT, with both having similar mandates to invest in industrial properties.

“Conflict of interest would be removed if EREIT merges with Sabana REIT,” the analyst says.


The analyst also notes that ESR Cayman, the sponsor of EREIT, had bought 26.8 million units of AAREIT for $37.3 million in November, giving it a deemed interest of 9.1%.

“EREIT and AAREIT are ranked the 22nd and 32nd S-REITs in terms of market cap. Combining the two S-REITs will propel the enlarged REIT to become the 17th largest with combined market cap of $2.5 billion,” Koh says.