The real estate sector accounted for the largest share of 49.8% with the total deal of mergers and acquisitions (M&A) at USD 44 billion. This followed by the financial sector (19.2%) with USD 16.9 billion in deal value, and high technology at 6.5% market share worth USD 5.7 billion, according to Refinitiv data.
Real estate investment trust (REIT) initial public offerings amounted to USD 1.4 billion, quadrupling from USD 315.6 million in 2018. Since the listing of the first REIT on the Singapore Exchange (SGX) in July 2002, the Singapore REIT (S-REIT) market has grown rapidly. With a market capitalization of approximately USD 100 billion and a total of 44 S-REITs and property trusts currently listed on the SGX as of the end of May 2019, the S-REIT market is now the largest REIT market in Asia ex-Japan.
In the largest deal of 2019, CapitaLand Ltd. spent S$6 billion to purchase two real estate units from Temasek Holdings Pte.
OUE Commercial REIT agreed to buy OUE Hospitality Trust in April 2019, creating one of Singapore’s 10 biggest REITs. Then in July, Ascott Residence Trust and Ascendas Hospitality Trust made a deal to create the largest hospitality trust in the Asia-Pacific region, with S$7.6 billion of assets.
The latest deal to rise involves Frasers Logistics & Industrial Trust, which agreed to buy Frasers Commercial Trust in an S$1.5 billion transaction.
Furthermore, data recorded by JLL, a global real estate services firm, showed that investment in Singapore’s commercial real estate market increased by more than 175% in the first three quarters of 2019 and looks set for a strong 2020. Singapore’s pole position is also supported by the heavy interest from global investors for Asian real estate, as the investment volumes in the Asia Pacific hit a record of USD 125 billion during the same period.
As a leading wealth management hub with more than S$3 trillion assets under management in Singapore, S-REITs are able to benefit from a wide pool of global and Asian institutional investors, private wealth investors as well as family offices. While the S-REIT space has traditionally been dominated by fund managers and local developers, a growing trend is recognized for overseas sponsors, attracted by the access to capital and the openness to overseas investments.
In general, Singapore commercial real estate sector has also seen extensive activity from private equity (PE) funds attracted by the access to capital and talent, ease of investment, as well as a favorable tax regime. Following the exemptions from licensing requirements, the regulatory framework solely managing PE real estate funds allow quite a lot of flexibility.
“Most Targeted” Nation in Southeast Asia
Singapore is said to be the “most targeted” nation in Southeast Asia for M&A, taking up 50.2% of all M&A activity in the region. A data recorded by Refintiv showed that M&A involving Singapore companies reached USD 88.3 billion in 2019, soaring 70.6% year on year from USD 51.7 billion. The number of deals recorded year to date was at 749, 13.9% lower than 870 in the same period last year. M&A activity targeting Singapore stood at USD 32 billion due to an 89.9% increase in deal value from the comparable period last year.
For the year to date, domestic M&A about doubled to USD 16.7 billion from the previous year. Inbound M&A activity was up 70.2% to USD 15.3 billion; while outbound activity rose 3.6% with USD 18.5 billion in deal value. Total cross-border deal activity amounted to USD 33.9 billion, up 25.9% compared to the previous year. Advisory fees were down 16.5% to USD 153.8 million when it came to completed M&A, from a record high of USD 184.2 million the year prior.
Investment banking activities in Singapore principally generated USD 577.8 million in fees for the first nine months of 2019, down 2% from 2018. In terms of equity-capital markets (ECM), Singapore equity and equity-linked proceeds totaled USD 5.7 billion in 2019, showing a 43.9% increase from USD 3.96 billion a year ago.