From OCBC Investment Research, Morning Call...
Quote: MBFC - the place to be at.
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Office REITs: The Going gets Exciting as Competition Heats Up
Both K-REIT Asia and Suntec REIT have announced plans to each acquire
a one-third interest in MBFC Phase One. MBFC is deemed a strategic
acquisition on the back government's commitment to pump more than
S$1b into infrastructure works to support Marina Bay's growth over the
next 10-15 years and increasingly greater demand for Grade-A office space
in Singapore. Noticeably, the acquisitions, if successful, will also propel
Suntec REIT's investment properties to approx. $5.8b, surpassing
CapitaCommercial Trust's S$5.2b. K-REIT Asia's investment properties,
accounting for the divestment of both Keppel and GE Towers, will also
levitate above S$2b, compared to the current $1.38b. All in all, we view
these two enlarged REITs as not only upping the stakes among Office
REITs but also exerting pressure on CapitaCommercial Trust and Frasers
Commercial Trust, who have yet to announce any local acquisitions YTD.
In addition, we feel that market attitude towards Office REITs is turning
due to increased leasing activity, better employment outlook and proactive
lease management tactics taken by office landlords. We remain upbeat
on the office-sector recovery; and now have an OVERWEIGHT rating for
the Office-REITs subsector