The soft property market and credit crisis are adding pressure on Singapore’s property trusts, said the analysts. They are expecting more cash-strapped Real Estate Investment Trusts (REITs) to seek funding through rights issues in the forthcoming months.
The analysts also said that three to four smaller market players may end up being absorbed by their larger counterparts. Currently, there are 21 REITs listed on the Singapore Exchange (SGX).
Banks are no longer as open as before to Singapore REITs that request for funds. Hence, REITs seek capital from unit-holders instead. In fact, CapitaMall Trust (CMT) recently launched a rights issue to assist in paying the debt obligation of $956 million.
However, analysts said that this option may only be applicable for those REITs that have strong parentage, similar to CapitaLand and Keppel Group.
“There are a number of REITs which do not enjoy such strengths in terms of sponsorship, assets quality and strengths, or relationships with banks. The share prices of those have dropped so far that to do a rights offering in order to raise capital is not an option,” said ARA Strategic Capital CEO, Stephen Finch.
REITs with such plans of fundraising should move faster, warned the analysts.
“Liquidity will dry up unless there is some positive news. I don’t see equity holders or shareholders being willing to part with so much money. As investors, they would rather sell and get their monies out,” said Kathleen Lee, Corporate Finance VP & senior analyst at Moody’s.
Analysts also expect that industrial and office REITs’ yields will be particularly under pressure as rental rates decline and the economy slumps. On the other hand, REITs with suburban malls have better performance, as retail sales in these segments are more resilient.