Global real estate investment trusts (Reits) faced challenges in 2023 led by the impact of higher interest rates. As a result, the sector faced higher borrowing costs and saw a reduction in the asset value of properties. This in turn saw the sector slow down in acquisitions over the past year.

On the other hand, divestment activities continued, as S-Reit managers actively managed asset exposures and balance sheet resilience.

In 2023, 11 S-Reits announced asset acquisitions valued at more than S$6 billion and exceeding S$3 billion in total purchase consideration. 

In comparison, 20 S-Reits announced asset acquisitions in 2022 valued at more than S$8 billion, with over S$7 billion in total purchase consideration. This was also considerably less than the 24 S-Reits that announced asset acquisitions in 2021, valued at more than S$15.3 billion and over S$12.7 billion in total purchase price consideration.

Acquisitions made in 2023 (by purchase consideration) were concentrated in the logistics segment, extending the same trend seen in 2022. There were, however, more investments into retail assets as compared to the year before.

There were two acquisitions in the logistics segment in the last month of 2023, made by Daiwa House Logistics Trust (DHLT) and Mapletree Logistics Trust (MLT).

DHLT announced the acquisition of D Project Tan Duc 2, a built-to-suit cold storage facility located in Long An province, Vietnam. This marked DHLT’s first venture outside of Japan since its listing in 2021.

The property was recently completed in September 2023, and is fully leased to a company that specialises in frozen and chilled food transportation services for a long-term lease of 20 years from October 2023.

DHLT expects the acquisition to be distribution per unit (DPU) accretive. On a pro forma basis, it estimates that the DPU for financial period 2022 will increase by approximately 1.9 per cent, and aggregate leverage is expected to increase from 36.2 per cent as at Sep 30, 2023, to 38.2 per cent post-acquisition.

In the same month, MLT announced the acquisition of a modern Grade A warehouse located in Farukhnagar, which is within the Delhi National Capital Region in India. The property is fully leased to one of India’s largest third-party logistics players with a nationwide presence. With a remaining lease of eight years as at Sep 30, 2023, and built-in annual rent escalations, MLT expects the acquisition to provide it with a stable and growing income stream.

This follows on from another acquisition announcement made by MLT in March 2023. It consisted of six logistics properties in Japan, one logistics property in Sydney, Australia, as well as a binding memorandum of understanding for the acquisition of a logistics property in Seoul, South Korea.

Across 2023, MLT also made several divestments of assets across Singapore and Malaysia. It noted that this was part of the Reit’s strategy to redeploy capital into investments of modern logistics assets with higher growth potential.

Source: SGX Research S-Reits & Property Trusts Chartbook.

REIT Watch is a weekly column on The Business Times, read the original version.

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