3 Best Singapore REITs to Buy That Offer Stability and Growth
March 27, 2023
Despite the positive effects from international borders reopening globally, investors have been facing challenges in recent times.
Mainly, that’s last year’s rising inflation impacting consumer spending.
Soaring interest rates have also increased borrowing costs for individuals and businesses.
Singapore real estate investment trusts (S-REITs) have felt the pressure from rising interest rates.
This has resulted in a decline of 12% in the total return of the iEdge S-REIT Index in 2022.
Nonetheless, investors should look beyond the near-term challenges in the market and focus on those Singapore REITs with high-quality assets, a history of increasing distribution per unit (DPU) and a robust sponsor.
In fact, with so much uncertainty and volatility in the market, S-REITs can provide stability and peace of mind to investors.
So, here are three S-REITs that I believe can offer stability and growth potential to long-term dividend investors.
1. Mapletree Logistics Trust
Mapletree Logistics Trust (SGX: M44U), or simply known as MLT, has a portfolio of 186 logistics properties across eight Asia-Pacific countries, with assets under management (AUM) of S$12.6 billion as of 31 December 2022.
Managed by a subsidiary of Mapletree Investments Pte Ltd, MLT reported strong financial performance in the first nine months of fiscal 2023.
With a high occupancy rate of 96.9% as of 31 December 2022 and positive average rental reversion of 2.9%, the REIT is well-positioned for future growth.
MLT is also strong financially as its gearing ratio stood at 37.4% as of 31 December 2022, despite taking into account the acquisitions that were completed while its interest rate stood at 2.6%.
The REIT’s debt is also well spread across various years with an average debt duration of 3.6 years.
At its current price of S$1.71, MLT shares give investors a forward distribution yield of 5.3%.
2. CapitaLand Integrated Commercial Trust
CapitaLand Integrated Commercial Trust (SGX: C38U), or CICT for short, is a commercial and retail REIT with a diversified portfolio of properties in Singapore, Germany, and Australia.
With an AUM of S$24.2 billion as of 31 December 2022 and strong sponsorship from CapitaLand Investment Limited (SGX: 9CI), CICT reported stable financial performance in 2022.
The REIT’s diverse tenant mix and high occupancy rate further strengthen its position in the market.
While rising interest rates could lead to higher borrowing costs, CICT has locked in 81% of its borrowings on fixed rates with a low average cost of debt of 2.7%.
This puts CICT in a strong position to navigate the rising interest rate environment.
At its current price of S$1.95, CICT is also trading at an attractive forward yield of 5.5%.
3. Frasers Logistics & Commercial Trust
Frasers Logistics & Commercial Trust (SGX: BUOU), or FLCT for short, offers a diversified portfolio of 105 logistics and commercial properties valued at S$6.7 billion as of 31 December 2022.
Its property portfolio is diversified across five countries; namely Singapore, the United Kingdom (UK), Australia, the Netherlands and Germany.
Sponsored by Frasers Property Limited (SGX: TQ5), FLCT has low aggregate leverage and ample debt headroom for acquisitions.
Looking at FLCT’s financial performance, we can see that more than two-thirds of its gross rental income (GRI) comes from properties in the logistics and industrial (L&I) segment.
Based on its latest Q1 FY2023 business update, FLCT has a healthy occupancy rate of 95.9% with the L&I properties continuing to remain fully occupied.
The REIT’s diversified tenant base, healthy occupancy rate, and strong rental reversions contribute to its stability and growth potential.
Investors who are looking to tap into the rising demand for logistics and industrial space will find FLCT to be a good investment option over the long term.
It also comes with an attractive forward distribution yield of 5.9% at its current level, which is the highest among the three REITs mentioned here.
Focus on quality assets
Despite challenges in the market, investors should not lose faith and focus on investing in REITs that own good-quality assets, offer consistent DPU growth, and have a strong sponsor.
Investors can find stability and growth potential in these three S-REITs.
As demand for logistics properties, and diversified commercial portfolios continues to grow, these REITs are well-positioned to capitalise on emerging opportunities and provide investors with peace of mind in the turbulent investment landscape.
They will be attractive investment options for dividend investors navigating the current unpredictable investment climate.
Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.
Billy is passionate about the capital market and believes in investing for the long haul. Prior to this, he was an economist at RHB Investment Bank, covering Thailand and Philippines market. He also worked as a financial journalist at The Edge Malaysia and has experience working with an asset management firm. Aside from the capital market, Billy loves a good conversation over a cup of coffee, is a fitness enthusiast and a tech geek.