• In the month thus far, ESR-REIT and Viva Industrial Trust have proposed a potential merger, whilst CCT, Manulife US REIT,  FLT,  Keppel DC REIT and SPH REIT have announced acquisitions to expand their property portfolios.
  • In the 2018 YTD, Singapore’s 34 REITs and six Stapled Trusts have averaged a 1.8% decline in total return, trimming the 12M average total return to 9.1%. The strongest performing REITs in the YTD were Sabana Shariah, Cromwell EUR, BHG Retail, Manulife US & IREIT Global.
  • The FTSE ST REIT Index currently maintains a 6.0% yield which is 3.3% above Singapore 10 year Government Bond Yields at 2.7%. Since Sep 2009, the yield differential between the Index and bonds has averaged 4.1%.

In the 2018 year through to 17 May, Singapore’s 34 Real Estate Investment Trusts governed by the Collective Investment Scheme (“CIS”) and six Stapled Trusts which are governed by both the CIS and the Business Trust Act averaged a 1.8% decline in total return.

This has brought their average 12 month total return to 9.1%. Together, the 40 trusts maintain an average indicative dividend yield of 6.6%. The three most recent REITs to list on SGX are Sasseur REIT, Cromwell European REIT and Keppel-KBS US REIT. These three REITS have added S$3.1 billion to the combined market capitalisation of S$85.8 billion. The market value of Singapore’s REIT Sector has expanded approximately 220% over the past 10 years.

Comparative Yields

Since global markets stabilised in the third quarter of 2009, the FTSE ST REIT Index has on average maintained  a month end yield of 6.3%, which is 4.1% higher than the month-end average of the MAS 10 year Government Bond Yield at 2.2%.

As illustrated below the difference between the two yields has narrowed to 3.3% at present, predominately due to higher bond yields. Currently, the indicative dividend yield of the FTSE ST REIT Index is 6.0% while the MAS 10 year Government Bond Yield is near 2.7%.

Source: SGX, Bloomberg, Thomson Reuters

 

Multiple Announcements in May

  • MANAGERS of ESR-REIT and Viva Industrial Trust (“VIT”) today announced a proposed merger to create Singapore’s fourth largest industrial REIT with a combined S$3.0 billion in assets. More details can be read here.
  • CapitaLand Commercial Trust (“CCT”) announced it was buying a majority stake in a prime Frankfurt property for 342.7 million euros (S$542.5 million), partially funded through an equity placement of at least S$212 million (click here for more). As announced today (click here) the issue price has been fixed at the top end of the price range at S$1.676 per New Unit.
  • On 16 May Manulife US REIT has announced a preferential offering of 22 new units for every 100 held at US$0.865 per unit to raise some US$197.2 million (click here for more). Of the amount raised, about 96.9% of the gross proceeds will be used to partially fund the proposed acquisitions by Manulife US REIT of the office building located at 1750 Pennsylvania Avenue NW, Washington DC; and the office building known as Phipps Tower located at 3438 Peachtree Road, Atlanta, Georgia.  Click here for the notice on the preferential offering books closure date.
  • On 10 May, Frasers Logistics & Industrial Asset Management, manager of Frasers Logistics & Industrial Trust (“FLT”), announced that FLT has successfully raised S$329 million in gross proceeds through a private placement overnight which was 3.9 times covered. Prior to the placement, the Manager had obtained the approval of Unitholders at the EGM in respect of the proposed acquisition of direct or indirect predominantly freehold interests in 21 industrial 4 properties located in Germany and the Netherlands, comprising 17 properties in Germany and four properties in the Netherlands, through the acquisition of all of the ordinary shares in the issued share capital of FPE Logistics B.V.
  • Keppel DC REIT announced on 7 May it was seeking to raise S$303.1 million in a private placement, with the majority of proceeds going towards paying for the acquisition of a new data centre. The new units commenced trading on 16 May. For more information click here.
  • Before trading on 1 May, SPH REIT announced it had agreed to acquire The Rail Mall for S$63.2 million, in a transaction expected to be funded by a combination of debt and internal resources (click here for more). The Rail Mall is a retail strip, with a 360-metre prominent road frontage to Upper Bukit Timah Road, comprising 43 single-storey shop units and 95 private car park lots.

 

Best REIT Performers in the 2018 YTD

As tabled below, the five best performers among the 40 trusts for the 2018 year thus far have averaged a 9.1% total return for the period. The best performer over the period, Sabana Shariah Comp Industrial REIT has seen its unit price gain 13.2% from its 12 February close.

Name SGX Code Market Cap S$M 17 May Closing Price Price Change YTD % Total Return YTD % 1 Year Total Return % Dividend Yield %
Sabana Shariah Comp Ind REIT M1GU 453 0.43 8.9 13.4 4.2 7.7
Cromwell European REIT** CNNU 1,583 0.635 12.8 12.8 12.8 N/A
BHG Retail REIT BMGU 396 0.79 6.8 10.5 21.9 6.9
Manulife US REIT** BTOU 1,279 0.92 2.0 4.9 21.1 6.3
IREIT Global UD1U 487 0.775 0.0 3.7 9.7 7.6
Average       6.1 9.1 13.9 7.1

Source: REITAS, Bloomberg (data as of 17 May 2018 ** not traded in SGD

On the total debt to total assets front, the average ratio of all 34 REITs and six stapled securities is well below the 45.0% maximum leverage ratio on deposited property at 33.5%. Trusts with the highest gearing ratios include IREIT Global, Soilbuild Business Space REIT, ESR-REIT, Viva Industrial Trust and OUE Hospitality Trust. Trusts with the lowest gearing ratios include SPH REIT, BHG Retail REIT, Fortune REIT, CapitaLand Retail China Trust and EC World REIT.

Together the 40 trusts average a 1.0x Price-to-Book (P/B) ratio and a 16.6x Price-to-Earnings (P/E) ratio. P/B ratios tend to be more meaningful than P/E ratios in valuations of REITs. Trusts with the highest P/B ratio include ParkwayLife REIT, Keppel DC REIT and First REIT. Healthcare-related businesses, such as ParkwayLife REIT and First REIT do generally command higher P/B premiums.

For the individual P/B and gearing information of the trusts in SGX StockFacts click on the trust names below. The table below details the recent performances of all 34 REITs and six stapled securities.

Name SGX Code Market Cap S$M 17 May Closing Price Total Return YTD % 1 Year Total Return % Dividend Yield %
Ascendas REIT A17U 7,761 2.650 0.3 9.0 6.0
CapitaLand Mall Trust C38U 7,416 2.090 0.8 11.7 5.4
CapitaLand Commercial Trust C61U 6,214 1.720 -8.9 15.1 5.0
Suntec REIT T82U 4,849 1.820 -13.2 7.9 5.5
Mapletree Commercial Trust N2IU 4,588 1.590 0.9 9.6 5.7
Keppel REIT K71U 4,010 1.180 -4.2 16.1 4.8
Mapletree Logistics Trust M44U 3,733 1.220 -4.7 15.3 6.2
Mapletree Industrial Trust ME8U 3,696 1.960 -1.2 15.3 6.0
Mapletree GCC Trust RW0U 3,640 1.160 -2.0 18.4 6.5
Fortune REIT** F25U 3,034 9.260 -1.1 5.3 5.5
SPH REIT SK6U 2,557 0.995 -2.7 6.7 5.6
Ascott Residence Trust A68U 2,440 1.130 -4.6 7.4 6.3
CDL Hospitality Trusts* J85 2,022 1.680 2.3 16.7 5.5
Frasers Centrepoint Trust J69U 2,019 2.180 0.0 13.4 5.5
Keppel DC REIT AJBU 1,851 1.370 0.1 19.6 5.2
ParkwayLife REIT C2PU 1,640 2.710 -7.3 10.1 4.9
Cromwell European REIT** CNNU 1,583 0.635 12.8 12.8 N/A
Frasers Logistics & Industrial Trust BUOU 1,582 1.040 -5.9 12.7 7.5
CapitaLand Retail China Trust AU8U 1,513 1.560 -3.2 6.1 6.5
Starhill Global REIT P40U 1,494 0.685 -8.8 -2.8 6.8
OUE Hospitality Trust* SK7 1,446 0.795 -3.6 20.0 6.4
Frasers Hospitality Trust* ACV 1,308 0.700 -7.8 6.8 7.1
Manulife US REIT** BTOU 1,279 0.920 4.9 21.1 6.3
Far East Hospitality Trust* Q5T 1,241 0.665 -5.1 18.1 5.9
Frasers Commercial Trust ND8U 1,200 1.360 -5.7 7.7 7.1
OUE Commercial REIT TS0U 1,098 0.710 1.8 5.9 6.6
First REIT AW9U 1,068 1.360 0.9 6.8 6.3
AIMS AMP Capital Industrial REIT O5RU 936 1.370 3.2 5.6 7.5
Sasseur REIT CRPU 927 0.785 -1.9 -1.9 N/A
Ascendas Hospitality Trust* Q1P 883 0.780 -5.7 10.1 8.0
Lippo Malls Indonesia Retail Trust D5IU 877 0.310 -19.2 -20.0 10.4
Viva Industrial Trust* T8B 866 0.890 -2.9 17.3 8.4
Cache Logistics Trust K2LU 846 0.790 -4.2 -2.2 8.2
ESR-REIT J91U 831 0.525 -3.1 0.2 7.0
Keppel-KBS US REIT** CMOU 748 0.885 -1.8 -1.8 N/A
Soilbuild Business Space REIT SV3U 691 0.655 1.7 4.4 8.5
EC World REIT BWCU 574 0.730 0.0 2.5 8.3
IREIT Global UD1U 487 0.775 3.7 9.7 7.6
Sabana Shariah Comp Ind REIT M1GU 453 0.430 13.4 4.2 7.7
BHG Retail REIT BMGU 396 0.790 10.5 21.9 6.9
Average       -1.8 9.1 6.6

Source: REITAS, Bloomberg & SGX StockFacts (data as of 17 May 2018). *CDL Hospitality Trust, OUE Hospitality Trust, Frasers Hospitality Trust, Far East Hospitality Trusts, Ascendas Hospitality Trust and Viva Industrial Trust are Stapled Trusts. **Note Cromwell European REIT is traded in EUR, Fortune REIT is traded in HKD, Manulife US REIT and Keppel-KBS US REIT are traded in USD however SGD equivalents are shown in table, with the exceptions of the 17 May close price. FLT yield based on annualised estimations.