All 31 of Singapore’s REITs with property assets, in addition to the six Stapled Trusts have averaged a 17.6% total return for the 2017 year through to 4 August. Total returns ranged from 8.0% for Fortune REIT to 30.0% for CDL Hospitality Trusts.
Institutions have been net buyers of the GICS® REIT Industry for the past four consecutive months, with cumulative inflows totaling S$133.6 million.
SGX also lists two REIT ETFs – the Phillip SGX APAC Dividend Leaders REIT ETF (click here) and NikkoAM-StraitsTrading Asia ex Japan REIT ETF (click here) which were listed on SGX in October 2016 and March 2017 respectively.
Real Estate Investment Trusts (REITs) are securities that invest in a diversified pool of professionally managed real estate assets. Following the establishment of REITs in Singapore in 2002, they now make up one-tenth of the 30 STI constituents and three of the five Straits Times Index (STI) Reserve stocks.
Ascendas REIT is the largest capitalised of the REITs listed in Singapore. In its recent quarterly reporting, Ascendas REIT noted that the US Federal Reserve remained dovish in its recent announcement in view of weakening US inflation data. Ascendas REIT further noted that prospects of another interest rate hike by the end of the year have dimmed, meaning interest rates are not expected to rise as fast as expected; and hence there may be a lower impact on its distribution per unit (DPU). For the most recent economic calendar which includes schedules for economic releases in the US, click here.
Over the first 31 weeks of 2017 the SGX REIT 20 Index generated a 18.8% total return, which compared to 16.0% for the same period in 2016. The 2017 year-to-date return was achieved with less volatility than observed for the same period last year. As of 4 August 2017, the 20 constituents of the SGX REIT 20 Index had averaged 180 day historical volatility of 13.9% compared to 18.9% for the same period last year.
Beyond the SGX REIT 20 Index, all 31 of Singapore’s REITs with property assets, in addition to the six Stapled Trusts averaged a 17.6% total return for the year through to the 4 August close. Institutions were net buyers of the GICS® REIT Industry for the past four consecutive months, with cumulative inflows totaling S$133.6 million – for more information click here.
As detailed in the table below, all 31 of the REITs with property assets and the six Stapled Trusts have generated positive returns in the 2017 year through to 4 August, with total returns ranging from 8.0% for Fortune REIT to 30.0% for CDL Hospitality Trusts.
|Name||SGX Code||Market Cap S$M||Price S$||Total Return YTD %||P/B||Dvd Ind Yld %|
|CapitaLand Mall Trust||C38U||7,162||2.020||11.8||1.0||5.5|
|CapitaLand Commercial Trust||C61U||5,276||1.710||22.2||0.9||5.4|
|Mapletree Commercial Trust||N2IU||4,444||1.540||15.7||1.1||5.7|
|Mapletree Industrial Trust||ME8U||3,326||1.850||17.8||1.3||6.2|
|Mapletree Logistics Trust||M44U||2,976||1.190||22.6||1.2||6.3|
|Ascott Residence Trust||A68U||2,543||1.180||16.8||1.0||6.5|
|Frasers Centrepoint Trust||J69U||1,909||2.070||13.7||1.1||5.7|
|CDL Hospitality Trusts*||J85||1,881||1.570||30.0||1.1||6.2|
|Starhill Global REIT||P40U||1,669||0.760||8.4||0.8||6.4|
|Parkway Life REIT||C2PU||1,658||2.740||20.6||1.6||4.6|
|Frasers Logistics & Industrial Trust||BUOU||1,638||1.090||23.5||1.2||N/A|
|Keppel DC REIT||AJBU||1,443||1.280||13.7||1.3||5.0|
|CapitaLand Retail China Trust||AU8U||1,418||1.600||24.4||1.0||6.3|
|OUE Hospitality Trust*||SK7||1,398||0.770||22.0||1.0||3.3|
|Frasers Hospitality Trust*||ACV||1,384||0.750||19.6||1.0||6.5|
|Lippo Malls Indonesia Retail Trust||D5IU||1,285||0.460||28.4||1.2||7.5|
|Far East Hospitality Trust*||Q5T||1,230||0.670||15.6||0.7||6.5|
|OUE Commercial REIT||TS0U||1,123||0.730||10.4||0.9||7.1|
|Frasers Commercial Trust||ND8U||1,111||1.380||16.1||0.9||7.1|
|Ascendas Hospitality Trust*||Q1P||941||0.830||23.1||0.9||6.8|
|Manulife US REIT||BTOU||917||1.260||13.6||1.1||7.0|
|AIMS AMP Capital Industrial REIT||O5RU||909||1.420||14.9||1.0||7.6|
|Viva Industrial Trust*||T8B||895||0.930||29.6||1.2||7.9|
|Cache Logistics Trust||K2LU||799||0.880||16.4||1.2||8.3|
|Soilbuild Business Space REIT||SV3U||740||0.700||17.8||1.0||8.4|
|EC World REIT||BWCU||625||0.800||9.5||0.9||3.1|
|Sabana Shariah Comp Industrial REIT||M1GU||469||0.440||24.3||0.8||8.5|
|BHG Retail REIT||BMGU||366||0.740||16.5||0.9||6.8|
Source: SGX, Bloomberg & SGX StockFacts (data as of 4 August 2017). Note table excludes Saizen REIT.
*Note CDL Hospitality Trusts, OUE Hospitality Trust, Frasers Hospitality Trust, Far East Hospitality Trusts, Ascendas Hospitality Trust and Viva Industrial Trust are Stapled Trusts.
Development & Leverage Limits
The development limit for the deposited properties of REIT was increased to 25% effective January 2016. In addition, the leverage limit for a REIT was increased from 35% to 45% of the REIT’s total assets. The 60% limit applicable with a credit limit no longer exists. The Monetary Authority of Singapore (MAS) has also continued to allow stapled securities structures with a REIT component to operate without group operational limits – for more information click here.
REITs raise capital to purchase primarily real estate assets, usually with a view to generate income for unit holders of the fund. This allows individual investors to access real property assets and share the benefits and risks of owning a portfolio of properties, which typically distribute income at regular intervals through dividends.
REITs can also be structured with a sponsor or a major shareholder. As MoneySENSE note – if a property developer launches a REIT, it may choose to keep a stake in the REITs itself and like any other investor, the developer in this instance will receive income distributed as dividends, where applicable. With the imperative of acting in the bests interests of the REIT unitholders at all times – sponsors can also provide market expertise strategic guidance and income support for the REIT’s first five years. This information is disclosed in a REIT prospectus, allowing investors to assess REITs’ dependency on income support and the effect on yield.
As noted by MoneySENSE (click here) REITs are structured as trusts and thus the assets of a REIT are held by an independent trustee on behalf of unit holders – moreover the trustee has duties as laid out in the trust deed for the REIT which typically include ensuring compliance with all applicable laws, as well as protecting certain rights of unit holders. MoneySENSE further notes that:
- The underlying real estate properties are managed by a property manager and the REIT itself is managed by a REIT manager in exchange for a fee.
- MAS will not intervene on the structure of fees or types of fees that Managers charge, but will require them to disclose the justification for each type of fees charged. Managers will also have to explain the methodology for computing performance fees, and justify how this methodology takes into account unitholders’ long-term interests.
- The underlying assets are held by a trustee on behalf of the investors. Each party receives fees in return for his or her services. Most REITs have annual managers’ fees, property manager’s fees, trustees’ fees and other expenses that will be deducted from their cash yields before distributions are made. Some REITs which hold properties in foreign jurisdictions may also be subject to taxation by the relevant jurisdictions.
Like stocks, REITs have market risk – that is unit prices can move against the investor’s expectations. Other risks associated with a REIT investment can vary and depend on the unique characteristics of each REIT (i.e. leverage ratio, cost of refinancing, alignment of management fees), as well as the geographical location and quality of the underlying property investments (i.e. concentration of properties, length of lease). Other risks associated with stock investing (i.e. price risk, volatility and liquidity risks) also apply.
ETFs based on REIT Indices
SGX currently lists two REIT Exchange Traded Funds (ETFs) – the Phillip SGX APAC Dividend Leaders REIT ETF (click here) and NikkoAM-StraitsTrading Asia ex Japan REIT ETF (click here) which were listed on SGX in October 2016 and March 2017 respectively. Both ETFs are tracking indices focused on REITs based in the Asia Pacific region.
From their launch to 4 August, the Phillip SGX APAC Dividend Leaders REIT ETF has generated a 5.4% total return [or 7.8% in USD] and the NikkoAM-StraitsTrading Asia ex Japan REIT ETF has generated a 8.7% total return. Both ETFs are non-SIP, that is Excluded Investment Products.
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