By Kevin Lim and Daryl Loo

SINGAPORE (Reuters) - Singapore's once booming real estate investment trusts (REITs) may face a round of mergers to weed out the weak who find it increasingly tough to raise funds and refinance loans because of the global credit crisis.

At least six of Singapore's 20 listed REITs are valued below what their properties are worth, as are many trusts in Japan and Australia, which means expansion is hampered by higher financing costs and investor returns are limited.

Some of the trusts will face higher interest payments when they need to refinance their debt in coming months, leading to lower earnings and distribution to unitholders.

"I would expect consolidation to gather pace in the course of the next 6-12 months," said Tony Darwell, head of Asian equity research at Nomura. "The cost of debt has risen and it is impacting everyone, especially entities that are highly geared."

For investors, many of whom are already steering clear of property and other assets that rely on debt financing, the takeover speculation means some REITs such as Macquarie MEAG Prime may get bid up to prices closer to book value.

But others such as Mapletree Logistics Trust could see their shares fall further, due to large amounts of debt on their books.

"Singapore's REIT market is still very young and shouldn't have reached the stage for consolidation, but the situation now is quite conducive (to that)," said Credit Suisse analyst Tricia Song.

Singapore's market for property trusts, Asia's third largest, has grown rapidly since 2002 when the first REIT, CapitaMall Trust (CMLT.SI: Quote, Profile, Research), went to market. The industry has since grown to 20 REITs worth $19 billion (9.6 billion pounds), although that number may shrink as at least two players are up for sale.