SREITs expected to pursue more acquisition in 2010 - OCBC

Singapore REITs are expected to pursue more acquisitions in 2010 to drive growth, with deals likely to be funded by private placements, says OCBC Investment Research.

“Opportunistic acquisitions will be very much in vogue in 2010 as some REITs shore up declining earnings and others exploit favourable market conditions,” it says in a research note although funding sources may be limited as REIT managers unlikely to increase their aggregate gearing level to make new purchases.

OCBC adds that raising equity through rights issues may also be challenging as REIT sponsors, institutional investors are already over-leveraged. Steep discounts to ensure successful rights issues may also obstruct earnings-accretive acquisitions.

“As a result, private placements are likely the most promising source of funds in 2010 in our view.”