Top 8 REITS to invest in Singapore for 2017
In my previous article, I discussed how Singapore Real Estate Investment Trusts (S-REITs) are a solid asset class with the potential to provide attractive dividend returns backed by prime real estate.
Out of the 38 listed REITs on the Singapore Exchange, here are the Top 8 REITs that you need to put in your investment portfolio now.
Lippo Malls Indonesia Retail Trust
Lippo Malls Indonesia Retail Trust is a pure play retail REIT, with all the underlying mall portfolios located in prime districts in high growth nation Indonesia. Buying into this REIT effectively allows investors to gain access to rising wages and disposable income growth in Indonesia where all the combined factors translate into higher spending at prime malls. Its full year FY2016 dividend yield at the current market price of $0.43 stands at a sweet 8%, one of the highest among listed REITS in Singapore.
BHG Retail REIT
BHG Retail REIT was newly listed in 2016. Its main properties comprised of prime shopping malls in urban China cities and the REIT is also a full fledged retail focused REIT. The price dropped below its IPO listing price to an all time low of $0.57 per unit. However it has since recovered to $0.71 as investors started to appreciate the stability of their dividend payouts. Investors are also anchored on the fact that the asset management arm of China CITIC Bank, one of China’s largest commercial banks bought 68 million units at $0.745 each, about 5% higher than the current market price, bringing its effective stake to about 14% of the total shareholder base. Its annualized dividend payout translates into an effective yield of 7% at current market prices, almost comparable to Lippo Malls Indonesia Retail Trust, making it a top buy at current prices.
SPH REIT owns the Paragon and Clementi mall. One of the key attractiveness of SPH REIT is its low gearing. In fact, its gearing level is the lowest among all listed REITS in Singapore. This provides more stability in terms of distribution as less rental proceeds are used for the repayment of borrowings. This provides SPH REIT with the ability to gear up for future acquisitions which are yield accretive. Its solid dividend yield at 5.6% is also backed by near 100% occupancy for its mall property portfolios.
Fortune REIT is ideal for investors looking to gain exposure to the vibrant Hong Kong retail sector. From 2006 to 2016, Fortune REIT has managed to grow its distribution per unit at a CAGR of 3.87%. Its 17 strong retail property portfolios are all enjoying near full occupancy rate with an average of 96.7%. The Hong Kong’s economic resilience has made Fortune REIT a choice investment where globally it is known as a shopping haven. Dividend yield for Fortune REIT is at a healthy 5.4% per annum, and its gearing levels stood at 29%, far lower than the statutory gearing limit.
CDL Hospitality Trust
For investors looking to be exposed to the global tourism sector, CDL Hospitality Trust is a strong buy. Its property portfolios are scattered all over the world in major cities from Tokyo to Perth with healthy tourist arrivals fueled by business travellers every single year. CDL HTrust provides excellent geographical diversification, backed by world class hotels and run by a solid management team. Its Singapore portfolio makes up 58% of total property portfolio, with the remaining 42% strategically located in other major cities. It is always on the hunt for quality hospitality assets with the latest being the acquisition of Manchester hotel. Its track record is backed by an attractive dividend yield of 6.6% per annum, making it one of the best REITs in Singapore.
First REIT would be a great investment asset for serious REIT investors. Its property comprises hospitals and nursing homes and is operating in a niche sector. It has hospitals located in Singapore and South Korea, though its main focus remains largely in Indonesia. Healthcare spending in Indonesia as well as Singapore will see a rapid increase in the future and demand for quality healthcare services could grow alongside that. This bodes well for the REIT where its property supports the provision of healthcare services and various rooms tailored for medical examinations and surgical procedures. First REIT’s dividends continued right through the global financial crisis in 2008, where its distribution per unit per quarter remained stable at $1.92 cents per unit.
Mapletree Industrial Trust
Mapletree Industrial Trust's property portfolio is fully comprised of business parks serving multinational corporations. It makes a great fit to any investor’s REIT investment portfolio just for its ever increasing dividend payout. For the record, it has managed to grow its distribution per unit from 8.41 cents to 11.39 cents over the past 6 years, a CAGR of 5.2%. Investors buying into Mapletree Industrial Trust are effectively getting a world class management team backed by the Mapletree brand. Mapletree has been Singapore’s top property developer and property manager for years and investors can be assured the property portfolios are well taken care of. Its dividend yield is no slouch at all, providing investors an effective yield of 6.4% at current distribution payout.
OUE Hospitality Trust
OUE Hospitality Trust would also make an excellent REIT investment for a Singapore pure play hospitality REIT. Its property portfolio comprises solid 5 star hotels namely Crowne Plaza and Mandarin Orchard. It dividend yield is one of the highest offered at 7.2%. Singapore's tourist arrivals have been on a steady uptrend over the years leading up to 2016 with the Singapore government constantly seeking new input to attract tourist dollars. The OUE H Trust's hotels are upscale hotels that cater to well-heeled tourists whom are less price sensitive and value quality hospitality service. OUE Hospitality is well positioned to reap solid occupancy from these tourist segment.
While these are some great investment opportunities to remember, REIT investors should not expect massive capital gains overnight. Instead, they should hold a long term view of the REIT's prospects in retaining tenants over the long run, and reaping the investment returns through regular and recurring distributions.
Investing is REIT has many similarities to direct real estate investment, but with far fewer complications. REITs continue to grow and would likely remain a vital asset class for income seeking investors.