REITs in Singapore (2020) – MoneySmart Guide to Investing in REITs

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

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.

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See a listing of online investment brokerages for REITs Singapore

 

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 well in the past two years and hopefully will continue to do so this year too, although there has been speculation that Singapore REITs might increase in price in 2020.

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 42 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
Ascendas REIT Industrial Singapore, Australia, UK $12,012.4m
CapitaLand Mall Trust Retail Singapore $9,332.7m
CapitaLand Commercial Trust Commercial Singapore, Germany $8,024m
Mapletree Commercial Trust Commercial, retail Singapore $7,871.9m
Mapletree Logistics Trust Industrial, logistics Singapore, Asia $7,562.5m
Mapletree Industrial Trust Industrial Singapore, US $6,515m
Suntec REIT Commercial, retail Singapore, Australia $5,116.3m
Keppel REIT Commercial Singapore, Australia, South Korea $4,328.5m
Keppel DC REIT Data centres Worldwide $4,130.9m
Ascott Residence Trust Hospitality Singapore, Asia $3,977.2m
Mapletree North Asia Commercial Trust Commercial, retail China, Hong Kong, Japan $3,769.3m
Frasers Centrepoint Trust Retail Singapore $3,375.5m
Frasers Logistics & Industrial Trust Industrial, logistics Australia, Germany, Netherlands $3,008.6m
SPH REIT Retail Singapore, Australia $2,950.2m
OUE Commercial REIT Commercial Singapore, China $2,804.1m
Parkway Life REIT Healthcare Singapore, Japan, Malaysia $2,262.7m
Ascendas India Trust Commercial, Retail India $2061.9m
ESR-REIT Industrial Singapore $1,903m
CDL Hospitality Trust Hospitality Worldwide $1,844.5m
CapitaLand Retail China Trust Retail China $1,837.8m
Manulife US REIT Commercial US $1,631.4m
Frasers Commercial Trust Commercial Singapore, Australia, UK $1,604.1m
Starhill Global REIT Commercial, retail Singapore, Australia, Malaysia, Japan, China $1,552.7m
Cromwell European REIT Commercial Europe $1,490.5m
Frasers Hospitality Trust Hospitality Worldwide $1,336.8m
Far East Hospitality Trust Hospitality Singapore $1,313.4m
AIMS APAC REIT Industrial Singapore, Australia $1,027m
Sasseur REIT Retail China $963.2m
Prime US Reit Commercial US $962m
First REIT Healthcare Singapore, Indonesia, South Korea $800m
Cache Logistics Trust Industrial Singapore, Australia, China $767.6m
Lippo Malls Indonesia Retail Trust Retail Indonesia $651.4m
Soilbuild Business Space REIT Industrial Singapore, Australia $644.6m
EC World REIT Logistics China $592.9m
IREIT Global Commercial Germany $551.2m
Dasin Retail Trust Retail China $533.8m
ARA Hospitality Trust Hospitality US $487.6m
Sabana Shari’ah Compliant Industrial REIT Industrial Singapore $484.4m
Eagle Hospitality Trust Hospitality US $461.6m
BHG Retail Trust Retail  China $340.7m
Elite Commercial REIT Commercial UK
Lendlease Global REIT Commercial, Retail  Singapore, Italy

All data is taken from SGX Stock Screener. The data and analysis are valid as of 20 Feb 2020. Note that the figures fluctuate on a day-to-day basis.  

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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 20 Feb 2020:

Singapore REIT Share price Dividend yield Portfolio type
Dasin Retail Trust $0.83 8.7% Retail buildings in China
Lippo Malls Indonesia Retail Trust $0.26 8.31% Retail buildings in Indonesia
EC World Reit $0.74 8.25% Industrial buildings in China
Sasseur REIT $0.82 8.15% Outlet shopping malls in China
Cache Logistics Trust $0.71 7.49% Logistics warehouse properties in Singapore
BHG Retail REIT $0.67 6.72% Shopping malls in China
Eagle Hospitality Trust $0.53 6.56% Hospitality buildings
IREIT $0.85 6.52% Office, retail and industrial buildings in Europe
Frasers Hospitality Trust $0.70 6.03% Hotels, serviced residences
ESR-REIT $0.55 5.62% Industrial buildings
Sabana REIT $0.46 5.31% Industrial buildings

Dasin Retail Trust (share price $0.83)

Dasin Retail Trust is Singapore’s first China retail property trust that provides direct exposure to the fast-growing Pearl River Delta Economic zone. This region is growing into an important economic hub of China and is a bustling region with a focus in manufacturing and trade. Currently, it gives the highest dividend yield with close to 9%.

Lippo Malls Indonesia Retail Trust (share price $0.26)

Lippo Malls Indonesia Retail Trust is a Singapore based real estate investment trust with the key objective of owning and investing long term in real estate in Indonesia that are used for retail or retail-related purposes. This REIT is a steal, offering a high dividend yield with a really low share price.

EC World REIT (share price $0.74)

EC World REIT is a Singapore real estate investment trust that invests in a diversified portfolio of real estate in China used for e-commerce, supply chain and logistics purposes. This REIT provides direct exposure to the growing sector of logistics and e-commerce in China.

Sasseur REIT (share price $0.82)

Sasseur REIT 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, although that has dipped a little.

Cache Logistics Trust (share price $0.71)

The initial portfolio of Cache Logistics Trust consists of 6 high quality logistics warehouse properties located in Singapore. It has since grown to consist of 27 logistic warehouse properties in both Singapore and Australia, 10 in Singapore and 17 in Australia.

BHG Retail REIT (share price $0.67)

BHG Retail REIT is the first retail REIT sponsored by an established PRC homegrown retail property operator, Beijing Hualian Department Store Co. Ltd., to be listed on SGX. It has most recently proposed to acquire Badaling outlets, an outlet mall in Beijing, which marks its first investment in an outlet mall.

Eagle Hospitality Trust (share price $0.53)

Eagle Hospitality Trust has a well-diversified portfolio of internationally-branded hotels across 11 major US metropolitan areas. If you have been eyeing this REIT, now is a good time to buy due to its low price but hopefully it doesn’t drop further.

IREIT (share price $0.85)

IREIT has an investment strategy of primarily investing in real estate in Europe, which are used for office, retail and industrial purposes. Its current portfolio consists of 5 freehold office buildings in Germany valued at more than 500 million in Euros. The properties are located strategically in cities like Berlin, Munich and Bonn.

Frasers Hospitality Trust (share price $0.70)

Frasers Hospitality Trust is the first global hotel and serviced residence trust to be listed on SGX. Their hotels consist of well-known and familiar names like Sofitel, InterContinental, Novotel, Westin and Hyatt. Currently, they own 15 properties across the world in prime cities like Singapore, Sydney, Edinburgh, London, Kuala Lumpur, etc. In Singapore, they own Capri by Fraser at Changi City and Fraser Place Robertson Walk.

ESR-REIT (share price $0.55)

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.

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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.

 

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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.

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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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