With that, here are two smaller Singapore REITs – both with dividend yields over 5% – that investors can consider adding to their watchlists.
1. Lendlease Global Commercial REIT
If you’ve ever been to [email protected], a bustling shopping centre on Orchard Road, then you’ve visited one of the main properties owned by Lendlease Global Commercial REIT (SGX: JYEU).
The REIT also owns a freehold commercial building in Milan, Italy, a 31.8% effective interest in the Jem shopping mall in Jurong, and a Grange Road car park (that’s currently being redeveloped into a multifunctional event space).
Lendlease REIT is also a relatively new entrant to public markets, having only listed shares on the SGX in October of 2019.
Obviously, that didn’t turn out to be great timing with the Covid-19 pandemic but it has bounced back. At its [email protected] property, in its latest quarter its occupancy rate was at 98.9% with a robust tenant retention rate of 90%.
Meanwhile, tenant sales at [email protected] actually rose for the first nine months of 2021, increasing 14.1% year-on-year and was driven by multi-prong marketing strategies to help tenants. This increase came despite visitation numbers falling slightly (see below).
Source: Lendlease Global Commercial REIT Q1 FY 2022 investor update
Meanwhile, with a low gearing ratio of 34.3% and a robust interest coverage ratio (ICR) of 8.8 times, Lendlease REIT will look to tap its sponsor – Lendlease Group, a large Australian property firm – for acquisition opportunities.
With a 12-month forward dividend yield of around 5.5%, Lendlease REIT offers investors an interesting way to play the retail and commercial recovery in Asia and Europe.
2. AIMS APAC REIT
A smaller industrial REIT that’s focused mainly on Singapore, AIMS APAC REIT (SGX: O5RU) – also known as “AA REIT” – owns 28 warehouses and logistics properties around the country and in Australia.
In its latest H1 FY 2022 earnings, for the six months ended 30 September 2021, AA REIT posted net property income of S$47.7 million. That was up 19.4% year-on-year from the same period a year earlier.
It also managed to hike its second-quarter distribution per unit (DPU), basically its dividend, by 25% year-on-year to 2.50 Singapore cents. For the whole of the first half, it paid out a dividend of 4.75 Singapore cents.
Having said that, it does have a rather inconsistent track record on DPU increases with its FY2021 full-year payout actually lower than its FY2011 full-year payout.
It currently has a very healthy gearing ratio of just 24.7%, well below the 50% cap set by the MAS, while it also has a healthy ICR ratio of 4.5 times.
While the DPU may not be steadily growing, shareholders are given a higher yield for that risk. AA REIT units currently offer investors a 12-month forward dividend yield of 6.6%.
Looking for quality assets
In any environment it’s important to focus on quality. Yet when it comes to rising interest rates and inflation, REITs and the quality of their portfolios become even more crucial.
In that sense, it’s important to ensure investors fully understand the property assets that a REIT owns and whether these can command premium rental rates.
However, Singapore’s REIT market offers investors a diverse range of potential options and Lendlease Global Commercial REIT and AIMS APAC REIT are two that dividend investors can monitor going forward.
Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be.
In his spare time, Tim enjoys running after his two year-old son, playing football and practicing yoga.