Mergers and Acquisitions to Increase for REITs

Submitted by Share Trading on 25 November, 2010 - 09:28

A report (second annual REIT Monitor report) released by corporate advisory firm PKF Chartered Accountants and Business Advisers have said that Mergers & Acquisitions (M&A) will dominate the Real Estate Investment Trust (REIT) sector in the coming year.

In the report, it detail that there is an increasing divide between the so-called ''big eight'' real estate trusts and their smaller counterparts. The big eight REITs in their report include: CFS Retail Property Trust (ASX:CFX), Commonwealth Property Office Fund (ASX:CPA), Dexus Property Group (ASX:DXS), Goodman Group (ASX:GMG), Mirvac Group (ASX:MGR), GPT Group (ASX:GPT), Stockland Group (ASX:SGP) andWestfield Group (ASX:WDC).

Ed Psaltis, the PKF corporate advisory partner, said, "Over the 2010 financial year, the majority of REITs [63 per cent] were successful in decreasing their gearing levels mainly by paying down debt,'' Mr Psaltis said. ''But the number of REITs continuing to trade at heavy discounts could see merger and acquisition activity increase as the strong take over the struggling. Funding for takeovers was finally now available, coinciding with asset prices bottoming out and ASX pricing arguably on the mend in the aftermath of the GFC." He also noted, "The big eight currently have an average gearing level of a much lower 25 per cent."

Smaller trusts, such as the Centro groups including: (ASX:CNP) & (ASX:CER), the ING trusts such as (ASX:IIF)and Multiplex Prime Property Fund (ASX:MAF), they are surviving predominantly at the discretion of their senior lenders.

More detailed information about the current environment of REITs can be found: here and here.

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