There are 39 listed REITs on SGX, yet three out of four trade below book value. You would think consolidation would fix that, but external managers earn fees on the size of the REIT they run, so a merger that fixes the discount also erases someone’s income. I walk through why the sector stays crowded, how higher Fed rates raise the cost of capital, and what would actually need to change for mergers to happen.
Key takeaways:
39 S-REITs worth US$76.7 billion, average trades at 0.77 times book
More than three quarters below book, only nine at or above it
Fed hiked to 3.75 to 4 percent, DBS cut target prices by 9.6 percent
Mergers only happen within the same sponsor, fees never leave the building
Sponsors could waive fees or tie them to distribution growth, nobody has yet
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