Singapore is a regional financial hub for REITs. The Singapore Stock Market has listed 44 REITs with a combined market value of S$115 billion as of Dec 31, 2021.
A REIT is a collective investment scheme specializing in real estate acquisitions, management, and financing properties in commercial properties, serviced apartments, industrial properties, data storage centers, and special-purpose properties, e.g., hotels and healthcare services.
Even during the pandemic, the Singapore REIT or S REIT market has maintained lucrative dividend yields. The average dividend yield for the market is 4%, while the highest-yield REIT pays over 10%, with the lowest paying 3.86%. It is not surprising that investors flock to the cash-paying market in volatile times. You know more about the REITs in the following.
What are REITs?
REITs are investment trusts which hold real estate and other properties. A trust manager is responsible for carrying out duties like purchasing, managing, and financing property activities according to the trust terms. REIT investors own a trust holding portfolio of properties, but not the assets directly.
A real estate investment trust(REIT) provides regular income collected from property investing activities to investors after the deduction of expenses and management fees given to REIT managers.
Nevertheless, it has few potential opportunities for capital appreciation. Unlike traditional properties, A REIT holds a chunk of properties, and its shares are tradable in the stock market. Besides, REITs distinguish themselves from the properties they invest in. The usual types include commercial, retail, apartments, industrial and special-purpose properties. Find out on the best stocks to invest in Singapore.
Pros and Cons of Investing in REITs
- REITs are liquid investments, and you can trade REIT shares like other stocks on a stock exchange.
- Then, real estate investment trusts invest in many properties so that investors can reduce the risk of loss due to the concentration of a few properties.
- A REIT is a transparent company listed on an exchange where its activities are open to the public.
The investment offers attractive and regular dividend income to investors. A typical dividend rate yields 5% or more is a lucrative investment to investors opting for steady income streams.
- Unlike other investments, REITs offer little for capital appreciation, and the asset value, like others, is subject to local economic conditions and market fluctuations.
- A manager may charge more fees for running properties, reducing the return available to investors after withholding expenses.
How do REITs compare with other public listed shares?
Resembling stocks, REITs are tradable on the stock exchange. They are liquid and subject to market conditions. Continuous quotes and pricing are available to investors. Besides, you can participate in REIT investing in another way. As stock ETFs, financial institutions offer REIT ETFs to investors in need of tracking comprehensive REITs to maximize returns. REIT ETFs track the index like iEdge S-REIT Indices in Singapore to mimic REIT investments.
Unlike stocks, an S REIT must distribute at least 90% of its profits to investors required by law. Besides, REITs must participate in property-related activities only. And a REIT should keep the debt-to-asset ratio of 45% to its maximum. The ratio gauges a REIT’s debt to its total asset, including combined debt and equity.
Top 15 Singapore REITs
- Ascendas REIT(A17U): The largest REIT in Singapore since listed in 2002, Ascendas specializes in business space, logistics and distribution centers, and industrial and data centers. The company holds portfolios across Australia, the United Kingdom, Europe, and the United States, besides Singapore. Ascendas has a market cap of S$11.6 billion, and a dividend yield is 4.76%.
- Suntec REIT(T82U): Listed in 2004, Suntec is an integrated commercial REIT investing in commercial properties and shopping malls. It also has portfolios in Australia. The market capitalization is S$4.4 billion, and its dividend yield is 5%.
- Keppel REIT(K71U): Keppel has commercial portfolios in Singapore, South Korea, and Australia. The REIT specializes in prime-grade offices and aims to provide steady income to investors. Listed in 2006, Keppel REIT has a market capitalization of S$4.1 billion and a dividend yield of 4.7%.
- Parkway Life REIT(C2PU): ParkwayLife, a healthcare-related REIT, has assets in Singapore and Japan. The property portfolios house hospitals, medical centers, and nursing homes. Listed in 2007, ParkwayLife has a market cap of S$2.9 billion and a dividend yield of 2.5%.
- OUE Commercial REIT(TS0U): Listed in 2014, OUE invests in commercial, hospitality, and retail properties in Singapore and Shanghai. The company has a market capitalization of S$2.2 billion and a dividend yield of 5.7%.
- ESR-REIT(J91U): ESR is an industrial REIT specializing in general and light industrial, logistics/warehouse, Hi-Specs industrial, and business park businesses. The REIT invests and manages 34 industrial properties in Singapore and 37 logistics properties across Australia. Listed in 2006, ESR has a market cap of S$1.7 billion and a dividend yield of 5.83%.
- StarhillGbl REIT(P40U): Starhill Global is a Singapore-based REIT investing in retail and office properties. Its portfolio includes investments from Australia, Malaysia, China, and Japan. The market valuation is S$1.38 billion and has a dividend yield of 5.27% since the 2005 listing.
- DigiCore REIT USD(DCRU): As its name implies, DigiCore is a leading REIT specializing in data centers or properties used for digital businesses. The portfolios situate in the United States and Canada. The market valuation is USD1.3 billion and has no dividend history since its listing at the end of 2021.
- Cromwell REIT(CWCU): The REIT acquires and manages office, retail, and light industrial/logistics assets in Denmark, Finland, Germany, Italy, the Netherlands, and Poland. Listed in 2017, Cromwell has a market cap of EUR1.3 billion, with a dividend yield of 7.42%.
- Ascott Trust(HMN): The REIT is a leading serviced apartment REIT with portfolios in Europe, the Asia Pacific region, and the Gulf region. Listed in 2006, Ascott Trust has a market capitalization of S$3.3 billion and a dividend yield of 4.13%.
- Mapletree Industrial Trust(ME8U): Listed in 2010, Mapletree is one of the largest Singapore industrial REITs. It has a portfolio of 86 properties in Singapore and 87(some through joint ventures) in North America. They comprise data centers, Hi-tech buildings, business parks, flatted factories, stack-up/ramp-up buildings, and light industrial buildings. The REIT has a market cap of S$6.6 billion and a dividend yield of 4.76%.
- Frasers Logistics and Commercial Trust(BUOU): Frasers has portfolios of logistics, industrial and commercial properties across Australia, Germany, Singapore, the United Kingdom, and the Netherlands. Listed in 2016, Lendlease has a market capitalization of S$977 million and a dividend yield of 5.11%.
- Mapletree Logistics Trust(M44U): Listed as one of the largest-cap S REITs in 2005, Mapletree has grown its portfolio to 140 wholly and partially owned logistics properties across Singapore, Hong Kong, Japan, China, Australia, South Korea, Malaysia, and Vietnam. The REIT aims to provide attractive returns to investors in the long term. The current market cap is S$8.9 billion, and the dividend yield is 4.85%.
- Mapletree Commercial Trust(N21U): Listed in 2011, the REIT has invested in 5 offices retail malls in Singapore. The market capitalization is S$6 billion, and the dividend yield is 4.56%.
- CapitaLand Integrated Commercial Trust(C38U): Listed in 2002, CapitaLand is the first and the largest REIT listed locally. The REIT has a portfolio of 21 properties in Singapore and 2 in Germany. The REIT’s market cap is S$12.8 billion, and its dividend yield is 4.49%.
What to Look out for in Assessing a REIT?
Several indicators help you assess a REIT:
- Funds from operations: It is the operating income generated from portfolio assets.
- Gearing ratio: It is the ratio derived by dividing the total debt by total assets. 45% is a statutory requirement for a REIT in Singapore. The higher the ratio is, the more risky a REIT is.
- Dividend yield: It is the distribution per unit divided by a unit price.
- Price-to-Book ratio: It is the unit price over book value per unit. The higher the ratio is, the more expensive a unit price is.
How to Start Investing
REIT is a passively-invested investment, which means you do not need to sit in front of a computer and concentrate on price moments for 5 to 7 hours without rest.
A REIT manager will do the rest for you. All you have to do is open a brokerage account with one of the financial institutions like banks or independent brokers such as DBS, OCBC, Poems, Saxo, or Syfe.
Singapore or S REITs offer you more choices in investing in real estate apart from physical ones. You can invest in industrial, commercial, retail, services apartments, and data centers REITs. You may appreciate its regular income streams, but the drawback is lower capital appreciation due to its dividend distribution requirement.
- Steady and regular income stream
- Lower capital appreciation
- It is a hassle-free investment
- Many REITs are available like commercial ones, retail, industrial properties, data centers, hospitality, special purposes, and serviced apartments.
- Unlike investing in physical properties, you can trade REIT shares like other stocks on the Singapore Stock Exchange.
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