Research from SooChow CSSD Capital Markets (Asia), SCCM Asia Research

SCCM Asia Research

Research from SooChow CSSD Capital Markets (Asia)

Headquartered in Singapore, SooChow CSSD Capital Markets (Asia) is an investment bank focusing on emerging growth companies across Asia, providing a full suite of investment banking services, including corporate finance, mergers and acquisitions advisory, equity capital markets, institutional equities sales and trading and equities research.

SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

<ul><li><a href="https://www.smartkarma.com/entities/capitaland-integrated-commercial-trust" target="_blank" data-smartkarma-citation="entities:105" rel="noopener">Capitaland Integrated Commercial Trust (CICT SP)</a> 2H21 DPU -8.9% YoY; Office cap rates compressed while retail rental reversions improving   </li><li><a href="https://www.smartkarma.com/entities/mapletree-north-asia-commercial-trust" target="_blank" data-smartkarma-citation="entities:5127" rel="noopener">Mapletree North Asia Commercial Trust (MAGIC SP)</a> 3Q22 Business Updates – High occupancies a priority against falling reversions</li><li><a href="https://www.smartkarma.com/entities/ascott-residence-trust" target="_blank" data-smartkarma-citation="entities:6560" rel="noopener">Ascott Residence Trust (ART SP)</a> 2H21 DPU +14% YoY; RevPAU rebounded strongly with plenty of growth initiatives in the pipelines</li></ul>

Capitaland Integrated Commercial Trust (CICT SP) 2H21 DPU -8.9% YoY; Office cap rates compressed while retail rental reversions improving   Mapletree North Asia Commercial Trust (MAGIC SP) 3Q22 Business Updates – High occupancies a priority against falling reversionsAscott Residence Trust (ART SP) 2H21 DPU +14% YoY; RevPAU rebounded strongly with plenty of growth initiatives in the pipelines

ASEAN Builder's Scoop (28Jan22) - CICT Office Cap Rates Compressed

<ul><li><a href="https://www.smartkarma.com/entities/keppel-dc-reit" target="_blank" data-smartkarma-citation="entities:85" rel="noopener">Keppel DC REIT (KDCREIT SP)</a> 2H21 DPU +2.8% YoY; Rising portfolio valuations as Cap rates tighten in APAC</li><li><a href="https://www.smartkarma.com/entities/parkway-life-reit" target="_blank" data-smartkarma-citation="entities:13422" rel="noopener">Parkway Life REIT (PREIT SP)</a> Parkway Life REIT (PREIT SP) 4Q21 DPU came in flat; Consistently expensive but delivering stable results</li><li><a href="https://www.smartkarma.com/entities/capitaland-integrated-commercial-trust" target="_blank" data-smartkarma-citation="entities:105" rel="noopener">Capitaland Integrated Commercial Trust (CICT SP)</a> CapitaLand Integrated Commercial Trust (CICT SP) to sell JCube at &lt;4% yield; Received a 10yrs ROFR on the potential redevelopment of the site  </li></ul>

Keppel DC REIT (KDCREIT SP) 2H21 DPU +2.8% YoY; Rising portfolio valuations as Cap rates tighten in APACParkway Life REIT (PREIT SP) Parkway Life REIT (PREIT SP) 4Q21 DPU came in flat; Consistently expensive but delivering stable resultsCapitaland Integrated Commercial Trust (CICT SP) CapitaLand Integrated Commercial Trust (CICT SP) to sell JCube at &lt;4% yield; Received a 10yrs ROFR on the potential redevelopment of the site  

ASEAN Builder's Scoop (25Jan22) - KDCREIT Rising Portfolio Valuations

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

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 <div class='content-caption'>Timeline of SREIT proposed and completed M&As since 2018</div>
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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&amp;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 (by CapitaLand Mall Trust and CapitaLand Commercial Trust), Frasers Logistics &amp; Commercial Trust (by Frasers Commercial Trust and Frasers Logistics &amp; Industrial Trust), Ascott Residence Trust (by Ascott Residence Trust and Ascendas Hospitality Trust), OUE Commercial REIT (OUE Commercial REIT and OUE Hospitality Trust), and ESR-REIT (by ESR-REIT and Viva Industrial Trust). 
Most recently announced on Dec 31, 2021 is the proposed merger between Mapletree Commercial Trust (MCT) and Mapletree North Asia Commercial Trust (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 of 30 September 2021 and MNACT’s AUM as of 31 October 2021). 
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 (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-specifications industrial properties, business parks and general industrial properties with total assets of approximately S$5.4 billion across Singapore and Australia (as of 30 June 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.  REIT Watch is a weekly column on The Business Times, <a href="https://www.businesstimes.com.sg/real-estate/s-reits-bigger-and-bolder-over-the-years">read </a>the original version.
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    Timeline of SREIT proposed and completed M&As since 2018


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&amp;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 (by CapitaLand Mall Trust and CapitaLand Commercial Trust), Frasers Logistics &amp; Commercial Trust (by Frasers Commercial Trust and Frasers Logistics &amp; Industrial Trust), Ascott Residence Trust (by Ascott Residence Trust and Ascendas Hospitality Trust), OUE Commercial REIT (OUE Commercial REIT and OUE Hospitality Trust), and ESR-REIT (by ESR-REIT and Viva Industrial Trust).  
Most recently announced on Dec 31, 2021 is the proposed merger between Mapletree Commercial Trust (MCT) and Mapletree North Asia Commercial Trust (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 of 30 September 2021 and MNACT’s AUM as of 31 October 2021).  
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 (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-specifications industrial properties, business parks and general industrial properties with total assets of approximately S$5.4 billion across Singapore and Australia (as of 30 June 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.   REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - S-Reits: Bigger and bolder over the years

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In 2021, the benchmark iEdge S-Reit Index generated 6.2 per cent total returns and the S-Reit and property trusts sector as a whole received S$1.4 billion of net retail inflows while institutional investors have seen net outflows of S$1.0 billion.

Throughout the year, 24 S-Reits announced asset acquisitions valued at more than S$15.3 billion and exceeding S$12.7 billion in total purchase price consideration. 
Mapletree Logistics Trust, Ascott Residence Trust and Ascendas India Trust were the most active S-REITs in terms of asset acquisitions last year, totalling purchase consideration of more than S$2.2 billion, S$780 million and S$400 million respectively. 
Recent S-REIT acquisitions announced in the month of December 2021 totalled S$1.2 billion in purchase consideration and were made by Ascott Residence Trust, CapitaLand Integrated Commercial Trust, First REIT and ParkwayLife REIT. 
These Reits acquired assets across a variety of segments including student accommodations, office, retail and nursing homes.

In 2021, Mapletree Logistics Trust (MLT) made several acquisitions in the logistics sector throughout the globe including South Korea, India, Singapore, Australia, Malaysia, China, Vietnam and Japan.

In November 2021, MLT announced the acquisition of logistics assets in China, Vietnam and Japan, valued at more than S$1.4 billion in total - its largest acquisition announcement of the year.

The trust noted that the pandemic has highlighted the importance of logistics and placed a greater emphasis on supply chain resiliency, fuelling demand for modern logistics space.

Hence, it believes that the acquisitions of these modern Grade-A logistics assets will position it well to capture these structural trends.

Ascott Residence Trust (ART) was the first Singapore-listed trust to venture into the student housing segment. In December last year, it announced the acquisition of 4 student accommodation assets in the United States for US$213.0 million (S$291.2 million).

The 4 assets have a total of 1,651 beds, serving more than 100,000 students across 5 universities in 3 states.

With ART's final acquisition announcement for the year, the trust has built a diversified portfolio of 8 student accommodation assets in the US with about 4,400 beds in under a year.

Beh Siew Kim, chief executive officer of the trust's manager noted that student accommodation assets and rental housing properties now make up about 16 per cent of its total portfolio value, surpassing the initial target of 15 per cent.

Ascendas India Trust (AIT) acquired several business parks, an industrial facility and a site for data centre development throughout the year.

In July 2021, it announced the acquisition of a greenfield site for the development of Phase 1 of its first fully-fitted data centre campus in Airoli, a growing data centre hub in Navi Mumbai, India.

The trust noted that Phase 1 of the development will have a built-up area of about 0.33 million sq ft and is scheduled to be ready by Q3 2024. REIT Watch is a weekly column on The Business Times, <a href="https://www.businesstimes.com.sg/companies-markets/wealth-investing/acquisitions-by-s-reits-exceed-s12-billion-in-2021">read </a>the original version.
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    SREIT asset


In 2021, the benchmark iEdge S-Reit Index generated 6.2 per cent total returns and the S-Reit and property trusts sector as a whole received S$1.4 billion of net retail inflows while institutional investors have seen net outflows of S$1.0 billion.

Throughout the year, 24 S-Reits announced asset acquisitions valued at more than S$15.3 billion and exceeding S$12.7 billion in total purchase price consideration.  
Mapletree Logistics Trust, Ascott Residence Trust and Ascendas India Trust were the most active S-REITs in terms of asset acquisitions last year, totalling purchase consideration of more than S$2.2 billion, S$780 million and S$400 million respectively.  
Recent S-REIT acquisitions announced in the month of December 2021 totalled S$1.2 billion in purchase consideration and were made by Ascott Residence Trust, CapitaLand Integrated Commercial Trust, First REIT and ParkwayLife REIT.  
These Reits acquired assets across a variety of segments including student accommodations, office, retail and nursing homes.

In 2021, Mapletree Logistics Trust (MLT) made several acquisitions in the logistics sector throughout the globe including South Korea, India, Singapore, Australia, Malaysia, China, Vietnam and Japan.

In November 2021, MLT announced the acquisition of logistics assets in China, Vietnam and Japan, valued at more than S$1.4 billion in total - its largest acquisition announcement of the year.

The trust noted that the pandemic has highlighted the importance of logistics and placed a greater emphasis on supply chain resiliency, fuelling demand for modern logistics space.

Hence, it believes that the acquisitions of these modern Grade-A logistics assets will position it well to capture these structural trends.

Ascott Residence Trust (ART) was the first Singapore-listed trust to venture into the student housing segment. In December last year, it announced the acquisition of 4 student accommodation assets in the United States for US$213.0 million (S$291.2 million).

The 4 assets have a total of 1,651 beds, serving more than 100,000 students across 5 universities in 3 states.

With ART's final acquisition announcement for the year, the trust has built a diversified portfolio of 8 student accommodation assets in the US with about 4,400 beds in under a year.

Beh Siew Kim, chief executive officer of the trust's manager noted that student accommodation assets and rental housing properties now make up about 16 per cent of its total portfolio value, surpassing the initial target of 15 per cent.

Ascendas India Trust (AIT) acquired several business parks, an industrial facility and a site for data centre development throughout the year.

In July 2021, it announced the acquisition of a greenfield site for the development of Phase 1 of its first fully-fitted data centre campus in Airoli, a growing data centre hub in Navi Mumbai, India.

The trust noted that Phase 1 of the development will have a built-up area of about 0.33 million sq ft and is scheduled to be ready by Q3 2024.  REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - Acquisitions by S-Reits exceed S$12 billion in 2021

<ul><li><a href="https://www.smartkarma.com/entities/mapletree-commercial-trust" target="_blank" data-smartkarma-citation="entities:106" rel="noopener">Mapletree Commercial Trust (MCT SP)</a> and <a href="https://www.smartkarma.com/entities/mapletree-north-asia-commercial-trust" target="_blank" data-smartkarma-citation="entities:5127" rel="noopener">Mapletree North Asia Commercial Trust (MAGIC SP)</a> proposed merger to form Mapletree Pan Asia Commercial Trust (MPACT); DPU and NAV accretive to MCT unitholders</li><li>The transaction will be ~8.9% and ~6.5% of accretive to DPU and NAV, respectively, on a pro forma basis to MCT unitholders. As for MAGIC unitholders, total consideration is at an attractive premium over trading prices and implies a 1.0x P/NAV, translating into a 1-year total return of ~32.2%</li><li><a href="https://www.smartkarma.com/entities/capitaland-integrated-commercial-trust" target="_blank" data-smartkarma-citation="entities:105" rel="noopener">Capitaland Integrated Commercial Trust (CICT SP)</a> acquires 50% interest in Sydney office building for ~S$410m; DPU accretive by ~1%</li></ul>

Mapletree Commercial Trust (MCT SP) and Mapletree North Asia Commercial Trust (MAGIC SP) proposed merger to form Mapletree Pan Asia Commercial Trust (MPACT); DPU and NAV accretive to MCT unitholdersThe transaction will be ~8.9% and ~6.5% of accretive to DPU and NAV, respectively, on a pro forma basis to MCT unitholders. As for MAGIC unitholders, total consideration is at an attractive premium over trading prices and implies a 1.0x P/NAV, translating into a 1-year total return of ~32.2%Capitaland Integrated Commercial Trust (CICT SP) acquires 50% interest in Sydney office building for ~S$410m; DPU accretive by ~1%

ASEAN Builder's Scoop (3Jan22) - MCT/MAGIC Merger

Singapore

Capitaland Integrated Commercial Trust operates as a retail estate investment trust. The Compnay invests in retail and office properties and integrated developments. Capitaland Integrated Commercial Trust serves clients in Asia Pacific.

Capitaland Integrated Commercial Trust (CICT SP)

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Capitaland Integrated Commercial Trust (CICT SP)

ASEAN Builder's Scoop (28Jan22) - CICT Office Cap Rates Compressed

MAGIC high occupancy a priority; ART RevPAU rebounded strongly; CDREIT underlying operations recovering; FHT QoQ ongoing recovery; MREIT to acquire...

SCCM Asia Research

ASEAN Builder's Scoop (25Jan22) - KDCREIT Rising Portfolio Valuations

PREIT consistently pricey as results stable; CICT sells JCube at <4% yield; FLT divests CSE at ~2.5% yield; YLLG sells out Shanghai project; SPALI...

SCCM Asia Research

REIT Watch - 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...

Singapore Exchange Ltd (SGX)

REIT Watch - Acquisitions by S-Reits exceed S$12 billion in 2021

In 2021, the benchmark iEdge S-Reit Index generated 6.2 per cent total returns and the S-Reit and property trusts sector as a...

Singapore Exchange Ltd (SGX)

ASEAN Builder's Scoop (3Jan22) - MCT/MAGIC Merger

MCT/MAGIC merger; CICT buys Sydney office; KDCREIT buys UK DC; ART buys more US dormitories; ECWREIT buyers backed out; DASIN loan extension; VLL...

SCCM Asia Research

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