SGX lists 34 REITs, 7 stapled trusts and three property trusts with a combined market cap of more than S$100 billion. S-REITs was the top net buy sector in 6M2019, drawing net institutional inflows of S$396.3 million.
Among SGX’s 44 trusts, 4 are US-focused – Manulife US REIT and Keppel-KBS US REIT own, manage and operate office properties across various states, while ARA US Hospitality Trust and Eagle Hospitality Trust each manage a portfolio of hotels spanning key metropolitan areas in the world’s largest economy. The four have a combined market cap of S$4.0 billion.
In the YTD, Manulife US REIT and Keppel-KBS US REIT have averaged a total return of 24.0%. Since their respective listings in May, ARA US Hospitality Trust has gained 0.5%, while Eagle Hospitality Trust has registered a 4.1% decline.
Singapore Exchange lists 34 REITs, 7 stapled trusts and 3 property trusts with a combined market cap of more than S$100 billion. Singapore REITs was the top net buy sector in January-June 2019, drawing net institutional inflows of S$396.3 million over the period. S-REITs was also the top net buy sector in June. For a previously published Market Update on Singapore Office REITs, click here.
Among SGX’s 44 trusts, 4 are US-focused – 2 REITs own, manage and operate office properties across various states, while another 2 stapled trusts manage a portfolio of hotels located across metropolitan areas in the world’s largest economy. The 4 have a combined market capitalisation of about S$4.0 billion.
Manulife US REIT, which listed on SGX in May 2016, owns a portfolio of seven office properties located in Los Angeles, Irvine, Atlanta, Secaucus, Jersey City and Washington D.C., while Keppel-KBS US REIT, which made its debut in November 2017, owns 13 commercial properties spanning Seattle, Sacramento, Denver, Austin, Houston, Atlanta and Orlando.
Last Friday, a third US-focused office REIT – Prime US REIT – lodged its preliminary prospectus with the Monetary Authority of Singapore for a listing on SGX. The REIT, sponsored by KBS Asia Partners, has priced its IPO at US$0.88 per unit, with a deal size that was reduced to US$612 million from US$705 million previously. Based on its IPO price, the REIT manager is forecasting a distribution yield of 7.4% in FY2019 and 7.6% in FY2020. The REIT, which owns 11 prime office properties across the US valued at US$1.2 billion, counts Keppel Capital, Singapore Press Holdings, Hiap Hoe Investment and AT Investments among its cornerstone investors.
ARA US Hospitality Trust and Eagle Hospitality Trust both made their trading debuts on SGX in May. ARA US Hospitality Trust owns a portfolio of 30 upscale select-service hotels located across 21 states in the US under the Hyatt brand, while Eagle Hospitality Trust’s portfolio comprises 18 upscale full-service hotels located across top 30 metropolitan areas, branded under renowned hotel franchisors such as Hilton, InterContinental and Marriott.
In the 2019 year-to-date, the two US office REITs have averaged a total return of 24.0%, bringing their one-year total return to 4.7%. Both average a 12-month dividend indicated yield of 6.9%.
ARA US Hospitality Trust has gained 0.5% since its trading debut, while Eagle Hospitality Trust has registered a 4.1% decline since its listing. Both average a dividend indicated yield of 8.1% based on projections from their IPO prospectuses, and a price-to-book ratio of 0.8x.
The tables below detail the 4 US-focused REITs and stapled trusts, sorted by market capitalisation.
| Name | SGX Code | Market Cap (S$M) |
Total Return YTD (%) |
Total Return 1Y (%) |
Total Return 3Y (%) |
12M Div Ind Yid (%) |
P/B (x) |
|---|---|---|---|---|---|---|---|
| MANULIFE US REIT | BTOU | 1,650 | 19.5 | 10.8 | 43.5 | 5.9 | 1.2 |
| KEPPEL-KBS US REIT | CMOU | 848 | 28.5 | -1.4 | NA | 7.8 | 1.0 |
| Average | 24.0 | 4.7 | 6.9 | 1.1 |
| Name | SGX Code | Market Cap (S$M) |
Price Chg Since IPO (%) |
^ Div Ind Yid (%) |
P/B (x) |
|---|---|---|---|---|---|
| EAGLE HOSPITALITY TRUST " | LIW | 836 | -4.1 | 8.2 | 0.8 |
| ARA US HOSPITALITY TRUST * | XZL | 683 | 0.5 | 8.0 | 1.0# |
| Average | 8.1 | 0.8 |
Source: Bloomberg & StockFacts (data as of 1 July 2019)
Note: All four trusts are traded in USD, with SGD equivalents shown in table
* IPO date: 9 May 2019
" IPO date: 24 May 2019
^ Distribution yld as projected in IPO prospectus
# Calculated using proforma NAV per share of US$0.86 as provided in IPO prospectus
Healthy Outlook for US Office Market
DBS Research noted in a 17 June 2019 report that Keppel-KBS US REIT is positioned in markets with higher-than-average growth due to strong population growth and corporate relocations, while Manulife US REIT is a beneficiary of a long weighted average lease expiry (WALE) of about six years and in-place rents that are generally 5%-10% below market rates.
Despite recent growth concerns arising from current trade tensions, both REITs are expected to do well “as they are projected to deliver healthy 5%-8% three-year CAGR DPU growth on the back of (1) acquisitions made over the past year, (2) in-built annual rental escalation of 1%-3% and (3) tailwinds from the upturn in rents,” the report added.
Favourable Dynamics in the World’s Largest Lodging Market
UOB-Kay Hian Research initiated a buy call on ARA US Hospitality Trust in an 18 June 2019 report, noting that ARA is a pure play on upscale select-service hotels. See report.
“Upscale select-service is the sweet spot with higher margins and a faster pace of growth,” the report pointed out, adding that ARA has also been able to achieve higher revenue per available room (RevPAR) than its US select-service peers. ARA registered RevPAR of US$94 in 2018 on occupancy rates of 77.1%, compared to RevPAR of US$82 for its peers.
In its IPO prospectus, ARA US Hospitality Trust highlighted favourable dynamics in the world’s biggest hospitality market. “The US features the world’s largest lodging market with 5.3 million hotel rooms, accounting for approximately 30% of global hotel rooms inventory as of December 2018. Annual RevPAR is projected to grow at a CAGR of 1.8% between 2019 and 2022, driven by growth in real GDP and consumer spending,” it said.
Eagle Hospitality Trust also cited the strong US macroeconomic outlook and hospitality fundamentals as its key growth drivers in its IPO prospectus. “US business sentiment is close to all-time highs, driven by a favourable business environment, recent corporate tax cuts and earnings growth. Leisure hotel demand is similarly robust, driven by strong consumer confidence, low unemployment rate and accelerating wage growth,” the trust noted.
