Two of Singapore’s real estate investment trusts (REITs) have proposed a merger that would create one of the largest diversified REITs in the city-state with total assets of approximately S$6.8 billion ($5 billion), according to an SGX filing on Monday.
The respective managers of OUE Commercial REIT (OUE C-REIT) and OUE Hospitality Trust (OUE H-Trust) announced the proposed merger by way of a trust scheme arrangement, with OUE C-REIT acquiring all the issued and paid-up securities in OUE H-Trust in exchange for a combination of cash and new units in OUE C-REIT.
OUE Group will continue to retain a significant stake of 48.3 per cent of the total issued units in the enlarged REIT, according to the disclosure.
OUE C-REIT is a Singapore real estate investment trust listed on the Main Board of the SGX Securities Trading Limited while OUE H-Trust is a stapled group comprising OUE Hospitality REIT and OUE Hospitality Business Trust.
Aside from increasing the total assets of the merged REIT to S$6.8 billion, the proposed merger will also increase the market capitalisation to approximately S42.9 billion and a free float of approximately S$1.1 billion.
“Additionally, the investment mandate of the enlarged REIT will be broadened to include commercial, hospitality, and integrated developments. This will provide the enlarged REIT with greater flexibility to grow its portfolio,” the two managers said in a joint statement.
The combined portfolio will have seven properties across three asset classes – office, hospitality, and retail.
The commercial portfolio will include approximately 1.9 million square feet of prime office space in the core central business district and approximately 306,000 square feet of prime retail space, putting the enlarged REIT in “a strong competitive position”.
Likewise, the hospitality portfolio, which will include upscale hotels with an aggregate of 1,640 rooms, is well-located in the prime and strategic locations of Orchard Road and Changi Airport, and is managed by internationally-renowned hotel operators.
“This transformative merger creates a diversified, sizeable and liquid REIT, which will significantly enhance our visibility within the S-REITs universe and increase our relevance to a wider investor base,” said Tan Shu Lin, CEO of OUEC REIT’s manager.
The merger, according to Chen Yi-Chung Isaac, acting CEO of OUE H-Trust’s manager, creates a platform of scale equipped with an enlarged capital base and enhanced financial flexibility to drive long-term growth.