Singapore REITs - UOB Kay Hian 2021-08-31: The Leading Contenders For FTSE EPRA Nareit Developed Asia Index Inclusion


Singapore REITs - The Leading Contenders For FTSE EPRA Nareit Developed Asia Index Inclusion

Key criteria for FTSE EPRA Nareit index inclusion.

  • There are 3 key criteria for inclusion to the FTSE EPRA Nareit Developed Asia Real Estate Index:
    1. Size rule: The minimum investable market cap for FTSE EPRA Nareit Developed Asia Index was lowered from 0.3% to 0.1%. Based on Investible market cap for the index of US$418,944m as of Jun 21, the threshold for investible market cap has been lowered from US$1,257m to US$419m.
    2. Trading liquidity: Turnover at least 0.05% of units in issue adjusted by free float based on median daily trading volume each month.
    3. Geographical breakdown: At least 75% of total annual EBITDA derived from Developed markets over each of the previous two years.

Screening for top contenders.

  • We have shortlisted 14 S-REITs with market cap greater than US$500m that are not included in the FTSE EPRA Nareit Developed Asia index yet. See the summary table in report attached below.

Winners of beauty parade.

Top contenders for FTSE EPRA Nareit Developed Asia Index inclusion


  • Pivoting towards logistics assets. ESR-REIT completed the acquisition of 46A Tanjong Penjuru, a five-storey modern ramp-up logistics facility, for a purchase price of S$119.6m on 29 Jun 21. It plans to upgrade the property into an air-conditioned warehouse to capture higher rental tenants that handle high-value goods such as electronics and pharmaceutical products. ESR-REIT currently holds interest in 58 properties, of which 12 are logistics properties (25.2% of 1H21 rental income). It has six modern ramp-up warehouses.
  • Completed maiden overseas acquisition. ESR-REIT completed the acquisition of 10% interest in ESR Australia Logistics Partnership (EALP) for a purchase consideration of A$60.5m (S$62.4m) on 14 May 21. EALP is a private fund managed by ESR Asset Management (Australia), an indirect subsidiary of ESR Cayman. Its portfolio comprises 37 income-producing freehold logistics properties with total land of 1.3m sqm across five states in Australia. The remaining 80% interest in EALP is held by a wholly-owned subsidiary of GIC (Realty).
  • Asset enhancement initiatives for 16 Tai Seng Avenue 3 and 7000 Ang Mo Kio Avenue 5 (7000 AMK). ESR-REIT plans to increase GFA at both properties by tapping on unutilised plot ratio. It will add an additional floor to 16 Tai Seng Avenue 3 to increase GFA by 29,000sf or 13.8% and refurbishing the facade, drop-off point, lift lobbies, lifts and the external linkway to Tai Seng MRT station. It will create 265,000sf of additional GFA for high-tech tenants at 7000 AMK suitable for potential data centre tenants.
  • ESR-REIT provides distribution yield of 6.7% based on consensus DPU of S$0.031.
  • See

ARA LOGOS Logistics Trust (SGX:K2LU)

  • 1H21 DPU grew 10.6% y-o-y to 2.57 cents (up 0.7% y-o-y if we exclude distributable income of S$2m retained in 1H20 and capital distribution of S$0.6m in 1H21). ARA LOGOS Logistics Trust has completed the acquisitions of:
    1. five logistics properties in Brisbane,
    2. a 49.5% interest in New LAIVS Trust, and
    3. a 40.0% interest in Oxford Property Fund in Australia on 16 Apr 21.
  • It has also benefitted from appreciation of the Australian dollar against the Singapore dollar of 4.9% y-o-y.
  • Australia portfolio provided upside for NAV. ARA LOGOS Logistics Trust undertook a mid-year revaluation exercise and recognised gain in fair value for investment properties and property funds of S$143.4m. It benefitted from the compression of cap rates led by logistics properties in Australia. NAV per unit increased 17.5% to S$0.67 in 1H21.
  • Tapping into sizeable sponsor pipeline. ARA LOGOS Logistics Trust could tap into a sizeable acquisition pipeline with an AUM of US$16b (116 properties with GFA of 8.9m sqm), of which more than half is located in Singapore, Australia and China. It benefits from LOGOS’ extensive development capabilities and expertise. It can tap into LOGOS’ enlarged network of tenants (such as Toll Group, DHL, Linfox Logistics, Alibaba Group, Renewable Energy Corporation and Kerry Logistics).
  • Maintain BUY. Our target price of S$1.02 for ARA LOGOS Logistics Trust is based on the dividend discount model (cost of equity: 6.5%, terminal growth: 1.5%).
  • See 

Lendlease Global Commercial REIT (SGX:JYEU)

  • Redevelopment of Grange Road Car Park to draw more youths to 313@Somerset. Construction for the redevelopment of Grange Road Car Park into a multi-functional event space is scheduled to commence by end-21. The project is 100% pre-committed and is anchored by Live Nation, a leading live entertainment company listed on NYSE. The event space is expected to be operational by early-23.
  • Sewing up the remaining 68.2% stake in Jem. Lendlease Global Commercial REIT is on track to complete the acquisition of a 28.1% effective stake for S$337.3m in Jem by end-Sep 21. The two funds - Lendlease Jem Partners Fund (LLJP) and Asia Retail Investment Fund 3 (ARIF3) - have reached their liquidity window this year whereby all investors have to decide whether to hold or divest Jem. Being the largest investor in LLJP and ARIF3, Lendlease Global Commercial REIT has significant influence over the decision. Lendlease Global plans to sew up the acquisition of the remaining 68.2% stake in Jem worth S$1.2b-1.4b within the next 12 months.
  • Maintain BUY. Our target price of S$1.01 for Lendlease Global Commercial REIT is based on dividend discount model (cost of equity: 6.0%, terminal growth: 1.0%).
  • See 

Cromwell European REIT (SGX:CWBU)

  • Diversification across Europe. Cromwell European REIT targets a long-term asset mix of at least 75% or more within Western Europe and at least 75% or more in office and light industrial/logistics. Tactically, it is currently focused on increasing the weighting of the light industrial/logistics sector towards 50% of the portfolio. It intends to divest a number of office buildings and other non-strategic assets and increase allocation to preferred sectors, through redeveloping assets in Paris, Amsterdam and Milan.
  • Accelerates pivot to logistics. Cromwell European REIT has embarked on a series of acquisition of logistics properties:
    • acquired logistics properties with NLA of 30,557sqm at Sangerhausen in Germany for €16.6m in Feb 20,
    • acquired a freehold intermodal logistics park with nine warehouses with NLA of 156,888sqm and a freight railway terminal at Monteprandone, Italy for €52.6m in Nov 20,
    • acquired 11 logistics properties in Czech Republic and Slovakia for €113.2m in Dec 20,
    • acquired modern logistics properties in Hradec Kralove, Czech Republic for €10.1m in Jun 21, and
    • acquired logistics properties in Warrington, UK for £10m in Aug 21.
  • Cromwell European REIT’s 5:1 unit consolidation became effective on 7 May 21.
  • Cromwell European REIT provides distribution yield of 7% is based on consensus DPU of 17.5 € cents.
  • See 

Mapletree North Asia Commercial Trust (SGX:RW0U)


  • 80% of Singapore’s population has completed their full regimen and received two doses of COVID-19 vaccines as of 29 Aug 21, which paves the way for easing of safe distancing measures, normalisation of economic activities and an eventual pick-up in GDP growth.
  • Limited new supply for office, logistics and retail segments in 2021.


  • We kept our earnings forecast unchanged.


  • A prolonged wave of COVID-19 Delta variant infections.

Jonathan KOH CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-08-31
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998.000 SAME 99998.000