Company Name: SUNTEC REAL ESTATE INV TRUST
| Research House: Credit Suisse | Price Call: SELL | Target Price: 1.37 |
Lender DBS Group Holdings’ acquisition of a 30% stake in a Singapore office tower for $1 billion shows that capital values and fundamentals of prime grade A office space will continue to hold up, said Credit Suisse.
However, the acquisition also means that Suntec Real Estate Investment Trust is unlikely to acquire a stake in the office tower, Marina Bay Financial Centre Tower 3, which was initially expected by the market. This means a limited acquisition pipeline for Suntec REIT.
The commercial REIT, which is managed by ARA Asset Management, an affiliate of Cheung Kong (Holdings), previously acquired stakes in other offices, One Raffles Quay, from the Hong Kong-listed property developer.
“This means that Suntec’s future injection pipeline may be limited as Cheung Kong has no further assets in Singapore,” Credit Suisse said.
It maintains its ‘underperform’ rating and target price of $1.37, highlighting potential downside risk in net property income due to disruption from upgrading works at its assets.
By 10:54 a.m., Suntec REIT units were up 1.3% at $1.605, and have surged 49% since the start of the year, outperforming the FTSE ST Real Estate Investment Trust’s 33.8% rise.
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