Acquisition might not always be an option for IREITs in 2012

OCBC expects industrial REITS to adopt a more cautious stance on their acquisition plans.

In a statement, the bank said that while it does not anticipate “any drastic change in lessees' financial health and occupancy” among the industrial landlords' rental space, the continuing economic turmoil at home and abroad may likely induce them to take on a more cautious stance and be more selective on their acquisition plans.

Uncertainty in the global economy continues as countries in the European Union grapple with the Eurozone crisis and the United States continues to witness an anemic number of job growth.

In Singapore, meanwhile, the government has revised its 2012 GDP forecast to 1-3% from an original prediction of between 3-5%

Despite the foreseen moderation in economic activity this year, OCBC expects IREITs to remain profitable due to the positive returns anticipated from their asset enhancement activities and built-in rental escalations.

With IREITs offering one of the highest DPU yield in the REIT sector, the bank said that the industrial trusts have “stronger financial positions and greater access to capital” even in a tempered economy.
  

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Tags: OCBC Research