OVERWEIGHT (Maintained)
Analyst
Highlights
- An influx of safe-haven liquidity and low domestic interest rates have led to a record volume of transaction for commercial properties, encompassing office and retail properties. Thus, the S-REIT sector is supported by firm asset valuation and continued low cost of debt.
- Maintain OVERWEIGHT. The S-REIT sector is a major laggard. Thus, S-REITs are likely to be more resilient. BUY CAREIT (Target: S$1.39), CICT (Target: S$3.06), LREIT (Target: S$0.79), MPACT (Target: S$1.71), NTTDCR (Target: US$1.29) and UIBREIT (Target: S$1.16).
Analysis
- The FSTREI corrected 5.7% in Sep 26, underperforming the STI's dip of 1.4%. Yield for 10-year Singapore government bonds rose 23bp to 2.58%. US core PCE inflation was stable at 3.0% yoy in Aug 26.
- KDCREIT is acquiring 88.6% effective interest in Tokyo Data Centre 4 and 5, two freehold, hyperscale fully fitted colocation DCs located in Inzai City, Greater Tokyo, Japan. The two DCs provide an NPI yield of 4-5%, compared with other comparable transactions at low-4%. The aggregate purchase consideration (100% basis) of JPY190.0b (S$1,548.5m) represents a 2.1% discount to the latest valuation. The two DCs are 100% occupied and provide an attractive built-in contractual rental escalation of 2.8%. Management estimated the acquisition to be accretive by 2.6%.
- KREIT has agreed to divest its 99.38% interest in T Tower, a freehold Grade A office building in Seoul, to a South Korea-based real estate fund. The agreed value for the entire property is KRW348.8b, representing a 37.2% premium to its May 19 acquisition price and a 7.4% premium to its Aug 26 valuation in local currency terms. The transaction implies an exit NPI yield of 3.9%. Together with the divestment of KR Ginza II in Tokyo and assuming net proceeds were used to repay debt, aggregate leverage would decline from 40.0% to 38.0% on a pro forma basis. KREIT intends to use up to S$25m of net sale proceeds for open-market unit buybacks.
- OpenAI to set up office at Shaw Tower. OpenAI is reportedly in talks to lease 100,000sf across five floors at the redeveloped Shaw Tower on Beach Road, marking a potential major expansion of its Singapore presence. The proposed office would represent a substantial increase from its current coworking space at CapitaSpring and signals confidence in Singapore as a base for its regional operations. While the lease has yet to be confirmed, the prospective move highlights the growing demand for premium office space from artificial intelligence companies expanding in Singapore.
Highlights
- An influx of safe-haven liquidity and low domestic interest rates have led to a record volume of transaction for commercial properties, encompassing office and retail properties. Thus, the S-REIT sector is supported by firm asset valuation and continued low cost of debt.
- Maintain OVERWEIGHT. The S-REIT sector is a major laggard. Thus, S-REITs are likely to be more resilient. BUY CAREIT (Target: S$1.39), CICT (Target: S$3.06), LREIT (Target: S$0.79), MPACT (Target: S$1.71), NTTDCR (Target: US$1.29) and UIBREIT (Target: S$1.16).
Analysis
- The FSTREI corrected 5.7% in Sep 26, underperforming the STI's dip of 1.4%. Yield for 10-year Singapore government bonds rose 23bp to 2.58%. US core PCE inflation was stable at 3.0% yoy in Aug 26.
- KDCREIT is acquiring 88.6% effective interest in Tokyo Data Centre 4 and 5, two freehold, hyperscale fully fitted colocation DCs located in Inzai City, Greater Tokyo, Japan. The two DCs provide an NPI yield of 4-5%, compared with other comparable transactions at low-4%. The aggregate purchase consideration (100% basis) of JPY190.0b (S$1,548.5m) represents a 2.1% discount to the latest valuation. The two DCs are 100% occupied and provide an attractive built-in contractual rental escalation of 2.8%. Management estimated the acquisition to be accretive by 2.6%.
- KREIT has agreed to divest its 99.38% interest in T Tower, a freehold Grade A office building in Seoul, to a South Korea-based real estate fund. The agreed value for the entire property is KRW348.8b, representing a 37.2% premium to its May 19 acquisition price and a 7.4% premium to its Aug 26 valuation in local currency terms. The transaction implies an exit NPI yield of 3.9%. Together with the divestment of KR Ginza II in Tokyo and assuming net proceeds were used to repay debt, aggregate leverage would decline from 40.0% to 38.0% on a pro forma basis. KREIT intends to use up to S$25m of net sale proceeds for open-market unit buybacks.
- OpenAI to set up office at Shaw Tower. OpenAI is reportedly in talks to lease 100,000sf across five floors at the redeveloped Shaw Tower on Beach Road, marking a potential major expansion of its Singapore presence. The proposed office would represent a substantial increase from its current coworking space at CapitaSpring and signals confidence in Singapore as a base for its regional operations. While the lease has yet to be confirmed, the prospective move highlights the growing demand for premium office space from artificial intelligence companies expanding in Singapore.
OVERWEIGHT (Maintained)
Analyst
IMPORTANT NOTICE - DISCLOSURES AND DISCLAIMERS
This report is provided subject to, and must be read together with, the full Disclosures / Disclaimers available at this link, which are incorporated by reference into this report. In particular, this report is intended for general circulation and informational purposes only and does not constitute personal investment advice or a recommendation to buy or sell any investment product or security. You should independently evaluate the information and, where necessary, seek advice from a qualified financial adviser regarding the suitability of any investment. Analyst certifications required under applicable regulations, including SEC Regulation AC (where relevant), are included in this report. By accessing, receiving or using this report, you acknowledge that you have read, understood and agreed to be bound by the Disclosures / Disclaimers, as may be amended, supplemented or updated from time to time.
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