Mercatus, a subsidiary of NTUC Enterprise, put up a portfolio of malls for sale many months ago.
The price tag was about S$4 billion and consists of Jurong Point, NEX (50% stake), AMK Hub and Swing By @ Thomson Plaza.
It has drawn interest as these prized assets are not on the market most of the time.
3 remaining bidders in the race are Frasers Property, Link REIT, and CapitaLand Integrated Commercial Trust (CICT).
Of which, the latest news is that Link REIT is in the frontrunner seat and a deal could be finalized in the next few weeks.
But the deal won’t be the original offer. It has been downsized to about S$2.5 billion with Jurong Point and Swing By @ Thomson Plaza as the only assets. NEX and AMK Hub have been left out.
This is because buyers are wary of chalking up loans when interest rates have risen considerably.
It is particularly more restrictive for REITs due to the gearing limit imposed on them. For example, CICT’s gearing is about 41% and the limit is 50%.
And given that REIT prices have fallen this year, it is not worthwhile to do rights issue to raise funds from unitholders. This is because the proceeds are lower and may even be dilutive if the new units are issued below the book value of the REIT.
Link REIT doesn’t have such issue as its gearing is just 25% and could fund the whole purchase largely via debt.
We covered Link REIT previously which we believe is undervalued.
It is the biggest REIT in Asia by market cap and has assets in Hong Kong, Mainland China, UK and Australia.
If this acquisition is successful, Link REIT would be able to diversify to another country – Singapore is a politically stable country with no natural disasters and a small land area makes properties highly prized assets.
But a S$2.5 billion purchase is just 6% of its S$40.12 billion portfolio. Not significant.
It is a good start and get a foot in Singapore nonetheless. If not for the rate hikes, Link REIT could have got more done this round.
Future opportunities would have to be dependent on who’s selling. Most of the malls in Singapore are owned by CICT and Frasers Centrepoint Trust, which are unlikely to be put up for sale.
But opportunities, though rare, can come from private players like Mercatus or property funds – Frasers Centrepoint Trust bought over AsiaRetail Fund to own Tiong Bahru Plaza, Central Plaza, White Sands, Hougang Mall and Tampines 1.
This could be another piece of positive news for Link REIT if it indeed clinches the deal, besides the reopening in Hong Kong.
