SGX Market Updates

Singapore REITs Average 18% YTD Distribution-Inclusive Returns


PUBLISHED ON |

07 August 2017

  • 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 and NikkoAM-StraitsTrading Asia ex Japan REIT ETF 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
%
Ascendas REIT A17U 7,705 2.670 21.4 1.3 6.7
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
Suntec REIT T82U 4,968 1.880 18.5 0.9 5.4
Mapletree Commercial Trust N2IU 4,444 1.540 15.7 1.1 5.7
Keppel REIT K71U 3,866 1.150 17.9 0.8 5.2
Mapletree Industrial Trust ME8U 3,326 1.850 17.8 1.3 6.2
Fortune REIT F25U 3,221 1.690 8.0 0.8 5.2
Mapletree GCCT RW0U 3,113 1.110 21.0 0.9 6.6
Mapletree Logistics Trust M44U 2,976 1.190 22.6 1.2 6.3
SPH REIT SK6U 2,556 1.000 9.7 1.1 5.5
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
First REIT AW9U 1,051 1.350 12.0 1.3 6.3
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
ESR-REIT J91U 730 0.560 9.2 0.9 7.0
EC World REIT BWCU 625 0.800 9.5 0.9 3.1
IREIT Global UD1U 490 0.790 14.6 1.2 7.9
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
Average 17.6 1.0 6.3

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.



REIT Structure

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.


Risks

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.







This article is provided by SGX My Gateway.



SGX My Gateway

SGX's investor education portal with market, product and investment information and events. Sign up now at sgx.com/mygateway to receive our investment updates and economic calendar.

This document is not intended for distribution to, or for use by or to be acted on by any person or entity located in any jurisdiction where such distribution, use or action would be contrary to applicable laws or regulations or would subject Singapore Exchange Limited (“SGX”) to any registration or licensing requirement. This document is not an offer or solicitation to buy or sell, nor financial advice or recommendation for any investment product. This document is for general circulation only. It does not address the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a financial adviser regarding the suitability of any investment product before investing or adopting any investment strategies. Use of and/or reliance on this document is entirely at the reader’s own risk. Further information on this investment product may be obtained from www.sgx.com. Investment products are subject to significant investment risks, including the possible loss of the principal amount invested. Past performance of investment products is not indicative of their future performance. Examples provided are for illustrative purposes only. While each of SGX and its affiliates (collectively, the SGX Group Companies) have taken reasonable care to ensure the accuracy and completeness of the information provided, each of the SGX Group Companies disclaims any and all guarantees, representations and warranties, expressed or implied, in relation to this document and shall not be responsible or liable (whether under contract, tort (including negligence) or otherwise) for any loss or damage of any kind (whether direct, indirect or consequential losses or other economic loss of any kind, including without limitation loss of profit, loss of reputation and loss of opportunity) suffered or incurred by any person due to any omission, error, inaccuracy, incompleteness, or otherwise, any reliance on such information, or arising from and/or in connection with this document. The information in this document may have been obtained via third party sources and which have not been independently verified by any SGX Group Company. No SGX Group Company endorses or shall be liable for the content of information provided by third parties. The SGX Group Companies may deal in investment products in the usual course of their business, and may be on the opposite side of any trades. SGX is an exempt financial adviser under the Financial Advisers Act (Cap. 110) of Singapore. The information in this document is subject to change without notice. This document shall not be reproduced, republished, uploaded, linked, posted, transmitted, adapted, copied, translated, modified, edited or otherwise displayed or distributed in any manner without SGX’s prior written consent.












Stock / REIT Search

Advertisement
Advertisement