A number of Singapore-listed retail REITs are currently trading at a premium to net asset value (NAV) but this is justified given recent valuations of suburban malls across Singapore, said DBS Equity Research in an investment report released on 5 April.
DBS pointed to the possible sale of Jurong Point to Mercatus co-operative, which is believed to transact at a record price of SGD3,343 (USD2,387) per square foot if it does proceed.
This would translate to a sale price of some SGD2.2 billion, reflecting a scarcity premium for similar sizeable retail malls in Singapore.
“While we believe that the final transacted price could be idiosyncratic to Jurong Point, it proves that the market is receptive to pay a premium for properties with good quality and scalability”, said DBS, adding that the sale will support the current premium to NAVs of Singapore-listed retail REITs.
“In fact, we could even see tighter cap rates for properties with sizeable scale and specifications, said DBS, citing properties like Causeway Point, VivoCity, and Tampines Mall, which are in the property portfolios of Frasers Centrepoint Trust, Mapletree Commercial Trust, and CapitaLand Mall Trust respectively.
The bank also opined that current yields for Singapore retail REITs of close to 6% are considered attractive.