DBS sees possible emergence of giant industrial REIT in Singapore

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DBS Equity Research has indicated that it sees the possibility of a giant industrial REIT emerging in Singapore.

The catalyst has emerged after recent overtures into the Singapore REIT market by E-Shang Redwood (E-Shang) - a subsidiary of American private equity firm Warburg Pincus, said the bank.

E-Shang, which currently has a stake in the manager of Cache Logistics Trust, recently acquired an 80% stake in the manager of Cambridge REIT, a 12% stake in the REIT itself, and a 5% stake in Sabana REIT.

The firm is also reportedly bidding for Singapore Exchange (SGX) mainboard-listed Global Logistics Properties.

“The catalyst to a merger would emerge if E-Shang and Warburg Pincus partner Mr Tong Jinquan to consolidate their stakes in all the industrial REITs they own, which would be the largest consolidation of almost all the mid-cap industrial REITs”, said the bank in an investment report.

The bank was referring to the Chairman of Summit Property Development, who is a significant shareholder of Cambridge Industrial Trust, Sabana REIT and two other mid-cap industrial REITs.

Against the backdrop of slower demand for factory and warehouse spaces, talk of consolidation in the Singapore industrial REIT market has been ongoing for about three years now.

The Singapore Economic Development Board reported in late February 2017 that when taken on a seasonally adjusted month-on-month basis, Singapore’s manufacturing output decreased 6.0% in January 2017.

Neither of the industrial REIT mentioned have issued statements on the consolidation possibility.

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Ridzwan Rahmat has been analysing Singapore-listed REITs and business trusts, since 2008. For disclosure purposes, Ridzwan is currently vested in Mapletree Greater China Commercial Trust, Mapletree Industrial REIT and Mapletree Logistics Trust.

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