Singapore Reits need more support in wake of Paragon Reit's proposed privatisation

Privatisations make sense when trusts have poor liquidity and face constraints in upgrading assets

IF INTEREST rates do not fall much further, equity fund-raising in the Singapore-listed real estate investment trusts (Reit) space could be muted.

Reits are sensitive to interest rates as higher borrowing costs affect distributions by Reits, and yield-driven investors flock to Reits when interest rates are low.

Also, investors today may be highly selective in supporting Reit equity fund-raising and prefer trusts to finance new acquisitions by selling existing assets.

Ominously, Singapore’s once high-flying Reit sector, which turns 23 later this year, risks shrinking if more listed property-related trusts get privatised and delisted.

Recently, Times Properties, a wholly owned subsidiary of Cuscaden Peak Investments, proposed privatising Paragon Reit via a scheme of arrangement at S$0.98 per unit.

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