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REITs in Singapore (2019) – MoneySmart Guide to Investing in REITs

Singapore REITs (2018) – MoneySmart Guide to Investing in REITs

Clara Lim

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Investing in real estate is part of the Singapore Dream. Own property, become a landlord, enjoy a consistent stream of rental income until the end of your days.

… I did say it’s a dream, right? In truth, being a landlord always sounds much nicer than it actually is.

For a start, you need buttloads of money to even think about becoming one. Most of us can barely scrape together enough for an HDB flat to live in, let alone become a property magnate.

Then there’s the ongoing business of finding and managing tenants, chasing for rent payments, sorting out air con and plumbing problems when they inevitably arise… When it comes down to it, being a landlord is neither as cushy nor glamorous as it seems from the outside.

So what if you want to be a landlord, but can’t? You invest in real estate investment trusts, better known as REITs. This is REITs 101.

 

Contents

  1. What are REITs? Can they be eaten?
  2. What kind of returns can you get from REITs?
  3. Is there a list of ALL the REITs in Singapore?
  4. Which are the most popular Singapore REITs and why?
  5. How do you choose a REIT?
  6. How can you start investing in REITs?

 

What are REITs? Are they the same as shares?

Singapore REITs are listed companies that you can invest in, similar to how you would buy shares in SGX-listed companies. In fact, REITs are simply a subset of the latter.

But while publicly listed companies use their investors’ money to run businesses, REITs use the money to buy, operate and manage properties.

When you invest in a REIT, you’re investing in the properties managed by that REIT. In a sense, you become part-owner of those shopping malls, business parks, or whatever it is the REIT manages.

Whatever the properties earn in rental income, some of that money is paid to you in dividends. Woohoo!

Even if you’re a total beginner to investing, you’re probably already familiar with some REITs. For example, CapitaLand Mall Trust, a retail REIT, is one of the best known in Singapore thanks to its string of “cloned” shopping malls. Another one that might ring a bell is industrial REIT Ascendas, which manages business parks like Science Park and Changi Business Park.

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What kind of returns can you get from REITs?

If you invest in a REIT, you can expect it to yield between 5% and 8% a year in dividends (paid out quarterly or every 6 months). Singapore REITs as a whole did extremely well in 2018 and seem poised to do the same in 2019.

How is it possible for yields to consistently be so high though? It’s because REITs are required by law to redistribute at least 90% of their taxable income each year i.e. pay it out in dividends. So, many investors like REITs for the (more or less) steady recurring income.

Also, the share price of a REIT can go up and down, just like regular stocks. That means that on top of the dividends, you can also make money by selling the REIT when its share price goes up.

But the flip side of it is that a REIT’s share price can fall, even as it continues to pay out big fat dividends. Some investors don’t mind the trade-off, but just be aware because you never know when you might need to sell off the REIT.

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What are REITs?REITs (Real Estate Investment Trusts) pay investorsdividends earned through rental incomes of theproperties they buy, manage and operate.Like all investments however, REIT share prices mightfall, leaving you hanging with less than the principalamount you invested, or nothing at all.

 

Is there a list of ALL the REITs in Singapore?

Yup, and it’s right here. There are currently 38 REITs listed on the Singapore stock market. They can be subdivided into these property sectors: office, retail, industrial, hospitality and healthcare.

Here’s a list of all the REITs, sorted by market cap – which is how much money investors have put into the fund. (This indicates the REIT’s size and popularity, but not its performance.)

Singapore REIT Type of REIT Geography Market cap
CapitaLand Mall Trust Retail Singapore $8,778.2m
Ascendas REIT Industrial Singapore, Australia, China $8,740.6m
CapitaLand Commercial Trust Commercial Singapore $7,235.9m
Mapletree Commercial Trust Commercial, retail Singapore $5,201.4m
Suntec REIT Commercial, retail Singapore $5,146.6m
Mapletree Logistics Trust Industrial, logistics Singapore, Asia $5,101.9m
Keppel REIT Commercial Singapore, Australia $4,289.3m
Mapletree Industrial Trust Industrial Singapore $4,068.4m
Mapletree North Asia Commercial Trust Commercial, retail China, Hong Kong $4,062.6m
Fortune REIT Retail Hong Kong $3,478m
SPH REIT Retail Singapore $2,636.1m
Ascott Residence Trust Hospitality Singapore, Asia $2,476.7m
Frasers Logistics & Industrial Trust Industrial, logistics Australia $2,328.2m
Frasers Centrepoint Trust Retail Singapore $2,120m
Keppel DC REIT Data centres Worldwide $1,973.8m
CDL Hospitality Trust Hospitality Worldwide $1,961.6m
Cromwell European REIT Commercial Europe $1,744.4m
Parkway Life REIT Healthcare Singapore, Japan $1,736.4m
ESR-REIT Industrial Singapore $1,711.89m
Starhill Global REIT Commercial, retail Singapore, Australia, Malaysia $1,526.8m
Manulife US REIT Commercial US $1,505.7m
CapitaLand Retail China Trust Retail China $1,487.7m
OUE Commercial REIT Commercial Singapore, China $1,445.1m
Frasers Hospitality Trust Hospitality Worldwide $1,376.5m
OUE Hospitality Trust Hospitality Singapore $1,335.7m
Frasers Commercial Trust Commercial Singapore $1,333.6m
Far East Hospitality Trust Hospitality Singapore $1,200m
Ascendas Hospitality Trust Hospitality Singapore, Asia $981.8m
AIMS AMP Capital Industrial REIT Industrial Singapore, Australia $971.1m
Sasseur REIT Retail China $861.6m
First REIT Healthcare Indonesia $790.3m
Cache Logistics Trust Industrial Singapore, Australia $770.7m
Keppel-KBS US REIT Commercial US $766.8m
Soilbuild Business Space REIT Industrial Singapore $643.3m
EC World REIT Logistics China $609.9m
Lippo Malls Indonesia Retail Trust Retail Indonesia $566.3m
IREIT Global Commercial Germany $474m
Sabana Shari’ah Compliant Industrial REIT Industrial Singapore $442.3m

All data is taken from SGX Stock Screener.

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Which are the most popular Singapore REITs and why?

Have trouble narrowing down your options? Here’s a snapshot of the 10 most popular “beginner” REITs in Singapore, ranked by yield (best to worst). The data is from SGX Stock Screener and is valid as of 6 Mar 2019:

Singapore REIT Share price Dividend yield Portfolio type
Sasseur REIT $0.735 9.37% Outlet shopping malls in China
Soilbuild REIT $0.60 8.73% Industrial buildings / parks
First REIT $1.02 8.6% Healthcare in Indonesia
Sabana REIT $0.425 7.57% Industrial buildings
ESR-REIT $0.54 7.14% Industrial buildings
Ascott REIT $1.15 6.28% Hotels, serviced residences
Ascendas REIT $2.81 5.62% Business parks
SPH REIT $1.02 5.43% Shopping malls
Suntec REIT $1.94 5.2% Offices & retail malls
Keppel REIT $1.46 4.41% Premium office buildings

Sasseur REIT (share price $0.735)

The newest REIT on the block is Sasseur REIT, and it certainly seems to have a winning formula: It manages factory outlet shopping malls in China. Sounds like money raining from the sky, doesn’t it? Its dividend yield has just been released, and it does live up to the hype with close to 10% dividends for those lucky investors who took the plunge early on.

Soilbuild REIT (share price $0.60)

With an impressive yield of over 8% last year, this industrial property-focused REIT has obviously caught the eye of investors. It specialises in industries like marine, oil & gas, manufacturing, electronics and R&D. Key properties in its portfolio include Solaris at One-North, Eightrium at Changi Business Park and Tuas Connection.

First REIT (share price $1.02)

If you want to invest in Asia’s growing healthcare sector, consider Singapore’s first healthcare real estate investment trust First REIT. It manages a large portfolio of hospitals and healthcare-related buildings in Indonesia, with a couple of properties in Singapore and South Korea.

Sabana REIT (share price $0.425)

Another industrial REIT with a promisingly high yield is the Shariah law-compliant Sabana REIT, which manages a number of standalone industrial buildings all over the island.

ESR-REIT (share price $0.54)

You can’t buy shares in the government-owned industrial property giant JTC, but ESR REIT comes pretty close. It has 56 industrial buildings across Singapore, mostly in places like Tuas, Woodlands and Changi. It’s also been in the news lately due to a merger with fellow industrial REIT, Viva Industrial Trust, which is a first in Singapore.

Ascott REIT (share price $1.15)

Part of the real estate behemoth that is CapitaLand, Ascott Residence Trust focuses on hotels and serviced residences, mainly properties under the Ascott, Somerset and Citadines hospitality chains. Although hospitality might be a volatile sector due to the short term nature of its tenants (guests), Ascott REIT has properties in 14 countries, which spreads out the risk.

Ascendas REIT (share price $2.81)

Singapore’s largest listed business/industrial REIT absolutely dominates the business park scene with over 100 properties here, plus 30+ in Australia. Key names in its portfolio as Science Park, One-North and Changi Business Park. The interesting thing about Ascendas’ size is that it also means many, many tenants including big players like Singtel – therefore it’s not dependent on just a few core tenants.

SPH REIT (share price $1.02)

Everyone’s favourite newspaper publisher SPH has a REIT subsidiary that manages two buildings, Paragon and the Clementi Mall. SPH also is known to be a financially conservative, and therefore low-risk, company.

Suntec REIT (share price $1.94)

Everyone knows about Suntec City, the namesake property of Suntec REIT, but Suntec REIT also has a large share in other large complexes like One Raffles Quay and Marina Bay Financial Centre, plus commercial buildings in Melbourne and Sydney.

Keppel REIT (share price $1.46)

Another giant in the Singapore REITs scene is Keppel REIT, which has been listed on SGX since 2006 and manages mainly premium office buildings like Ocean Financial Centre, Marina Bay Financial Centre, One Raffles Quay, and similar business developments in Australia. However, note that it has been underperforming compared to the others on this list.

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How do you choose a REIT?

The key is to find one that is well-managed and is able to ensure a consistent stream of income. Don’t just go for those with higher reported yields, but take the time to read the REIT’s prospectus and see if it fits with your risk appetite and how long you intend to remain invested.

SGX Stock Screener is a useful place to start. Filter “Sector” to “Equity Real Estate Investment Trusts (REITs)” and you can see some key stats from each listed company. If you want to see anything other than the default stats, you can customise your display and select a different set of data points.

This is a good way to see, at a glance, which REITs have the highest yield, which gives you an idea of how much in dividends you can hope to get.

But there’s no point buying a REIT that goes down in flames in the near future, so you also need to check for indications of its stability, such as the historical share price and debt-to-equity ratio. Fortunately, big-name REITs are generally fairly stable and it’s unusual to find one that has borrowed beyond its means.

What might impact your decision more is the nature of the REIT’s property portfolio – whether it specialises in industrial, business, healthcare, retail properties, and which countries it plays in.

Some REITs might be more resilient to changes in the economy and some might be less so. The current industrial property market, for example, might see a drop in rental prices in order to retain as many tenants as they can in a slower economy. This will probably lead to a drop in income, and dividends may not be paid out if the REIT reports an operating loss.

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Comparing REITsWhat to look out for?YieldHow much can youexpect in dividendsPrice-to-Book-Value ratioP/BVHigh ratios, high investor worthLow ratios, potential growthDebt-to-Equity ratioD/ELook for D/E ratios below 60%SGX StockFactsCompare all these factors atSome industries adaptbetter to economic changesthan othersIndustry

 

How can you start investing in REITs?

Don’t be too intimidated by the big names and data points. Investing in REITs is fairly simple and low risk (as long as you do your due diligence) – it’s a relatively passive sort of investment as you won’t have to monitor the stock market every day.

You just need to open an individual CDP account and set up a trading account with the brokerage firm of your choice. It might be possible to do both at the same time at your broker.

REITs are quite affordable and good for beginner investors who may not have that much cash on hand to invest. That said, do look out for high commission rates charged by brokers, which would eat into your profits.

What are your thoughts on investing in REITs? Share them with us.

 

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Investing in Shares (2019) – MoneySmart Guide to Buying SGX Stocks

Singapore Savings Bond Review (2019) – Interest Rates & Buying Guide

The STI ETF Step-by-Step Guide – What Is It and How To Start Investing

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Clara Lim

I used to be MoneyDumb. I hung out at H&M every day and thought that a $50 lunch set was a good deal. These days, I spend my time researching the crap out of life and trying to maximise utility on micro-decisions. I'm not sure if that's an improvement.