Income investors have a wide variety of REITs to choose from on the Singapore stock market.
REITs are a great asset class for reliable distributions as they are mandated to pay out at least 90% of their earnings to enjoy tax benefits.
That is why it’s crucial to select REITs that not only boast a great track record of increasing distribution per unit (DPU) but also possess a strong sponsor.
Such REITs are considered “defensive” as they can still maintain their DPU during tough times.
If you have S$20,000, you can consider these four solid Singapore REITs for your buy watchlist.
CapitaLand Integrated Commercial Trust (SGX: C38U)
CapitaLand Integrated Commercial Trust, or CICT, owns a portfolio of retail and commercial properties.
The REIT’s portfolio consists of 21 properties in Singapore, two in Germany, and three in Australia with assets under management (AUM) of S$24.2 billion as of 31 December 2022.
CICT has a high portfolio committed occupancy of 96.7% as of 30 June 2023 despite the macroeconomic headwinds.
The REIT also boasts a strong sponsor in property giant CapitaLand Investment Limited (SGX: 9CI).
For its fiscal 2023’s first half (1H 2023), CICT saw its revenue rise 12.7% year on year to S$774.8 million.
Net property income (NPI) improved by 10.1% year on year to S$552.3 million.
DPU inched up 1.5% year on year to S$0.053.
CICT has also demonstrated its resilience by reporting a positive rental reversion of 6.9% and 9.6% for its retail and office portfolios, respectively, for 1H 2023.
The REIT only has 1% of its debt maturing in 2023 and has 78% of its total loans on fixed interest rates.
In addition, CICT also has a varied tenant mix with no tenant contributing more than 5.4% of gross rental income.
Mapletree Logistics Trust (SGX: M44U)
Mapletree Logistics Trust, or MLT, is an industrial REIT with a portfolio of 193 properties across eight countries with an AUM of S$13.5 billion as of 30 June 2023.
MLT has a strong sponsor in Mapletree Investments Pte Ltd (MIPL), a global real estate firm with an AUM of S$77.4 billion as of 31 March 2023.
MIPL is wholly owned by investment firm Temasek Holdings.
MLT reported a respectable set of earnings for the first quarter of fiscal 2024 (1Q FY2024).
Although gross revenue and NPI dipped by 2.9% and 3.1%, respectively, its DPU inched up 0.1% year on year to S$0.02271.
The logistics REIT also reported a high portfolio occupancy of 97.1% as of 30 June 2023 while chalking up a positive rental reversion of 4.2% for the latest quarter.
82% of its loans are hedged to fixed rates and the REIT just completed the acquisition of eight properties in Japan, Australia, and South Korea that should help to boost its DPU.
Parkway Life REIT (SGX: C2PU)
Parkway Life REIT, or PLife REIT, is a healthcare REIT with a portfolio of 61 properties comprising three hospitals in Singapore, 57 nursing homes in Japan, and a strata titled lots/units in a specialist clinic in Malaysia.
PLife REIT has a strong sponsor in healthcare giant IHH Healthcare Berhad (SGX: Q0F).
The healthcare REIT has also grown its core DPU without a pause from 2008 to 2022, going from S$0.0683 to S$0.1438.
PLife REIT renewed the master lease for its Singapore hospitals last year with a term that lasts till December 2042, giving the REIT great visibility on its rental income stream.
The rent structure factors in inflation to raise the annual rental rate and rental income is projected to jump by nearly 25% year on year from 2026 onwards.
Elsewhere, the REIT also has a right of first refusal over a quality asset – Mount Elizabeth Novena, that could be injected into the REIT to grow its DPU further.
PLife REIT’s gearing is reasonable at 35.3% and its cost of debt is very low at 1.19%, allowing the REIT to consider further acquisitions to grow its portfolio.
Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust, or FCT, is a suburban retail REIT with a portfolio of 10 retail malls and one office building.
Its AUM stood at S$6.9 billion as of 31 March 2023.
FCT’s malls are well-connected to the MRT network and transport hubs, making them easily accessible for heartlanders.
The retail REIT is also the largest suburban retail space provider in Singapore with a 10.5% share, with the next largest landlord being CICT.
Slightly more than half of FCT’s gross rental income is derived from essential trades and services, making the REIT’s rental income resilient during economic downturns.
In addition, the retail REIT also has property giant Frasers Property Limited (SGX: TQ5) as a reputable sponsor.
For its latest fiscal 2023 third-quarter business update, FCT reported a high occupancy rate of 98.7%.
The REIT also enjoyed robust shopper traffic and tenant sales, with the former rising 16% year on year for the quarter and the latter experiencing a 5% year on year jump in the same period.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
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