Small industrial REITs cling to asset sales as valuations drop to record lows

Other players will follow Saizen’s lead.

Industrial REITs with smaller market caps and weaker sponsors might be pushed to sell of assets in order to generate shareholder value this year, according to a report by Maybank Kim Eng.

Most of the six industrial REITs with a market cap of less than than $1 billion are expected to take a leaf from Saizen REIT’s book. On October 31 last year, Saizen proposed the sale of its entire property portfolio for US$370 million, representing a 3.4% premium to its valuation.

“The move could signal that smaller SREITs - Saizen’s market cap before its announcement was c.SGD250m - trading at steep discounts to NAV or peers may be ready to unlock shareholder value. Small industrial SREITs with weak sponsors and therefore a limited growth pipeline could trade at permanent discounts. Asset sales might represent their best hope of accruing value to shareholders,” said the report.