The reported bid translates to record price of $3,343 psf and a net yield of close to 4.2%.
“The transaction should set a positive tone and support retail REITs’ current premiums to NAVs,” says DBS lead analyst Derek Tan in a Tuesday report.
Going forward, Tan believes this transaction could pave the way for tighter cap rates for properties with sizeable scale and specifications, such as Causeway Point, Northpoint, VivoCity, and Tampines Mall.
In addition, Tan say the transacted price should not impact the takeover pipelines for Singapore retail REITs, especially when it is from their respective sponsors.
“Retail REITs are trading at discount to their 5-year average valuation of P/NAV of 1.0x vs a 5-year average of 1.05x,” says Tan. “Yields of close to 6% are attractive in our view.”
DBS has “buy” calls on retail REITs CapitaLand Mall Trust, SPH REIT, and YTL Starhill Global, with target prices of $2.17, $1.03, and 85 cents, respectively.
As at 3.51pm, units of CapitaLand Mall Trust are trading half a cent higher at $1.98; units of SPH REIT are trading half a cent higher at 98.5 cents; and units of Starhill Global REIT are trading half a cent higher at 76.5 cents.
