- After close to a decade of robust expansion via acquisitions for assets under management (AUM) and distributions to unitholders, S-REITs asset portfolios have started to “age”. This implies increasing capex to maintain and “future proof” their assets.
Growing focus to decarbonize portfolios means S-REITs will look to recycle assets to grow.
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- With S-REITs recently celebrating their 20th anniversary, the progression of time has increased the requirement to re-invest in their portfolios. This has likely been a catalyst for the growing trend of asset recycling in recent years, which we expect to gain momentum in the S-REIT sector.
Divestments a key “currency” to fund growth.
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- While selected S-REITs have been actively reconstituting their portfolios as part of their strategy, we expect to see more S-REITs jumping on the bandwagon, especially when public debt and equity markets remain sub-optimal for S-REITs to pursue accretive acquisitions (for now). As such, taking into account potential re-investment needs and keep gearing at sub-40% level, we believe that divestments are a key funding source for asset acquisitions and renewal initiatives going forward.
Taking advantage of the “pricing gap” to drive towards normalizing valuations.
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Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @ https://www.dbs.com/insightsdirect/.
Derek TAN DBS Group Research | Rachel TAN DBS Research | Dale LAI DBS Research | https://www.dbs.com/insightsdirect/ 2024-03-28
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