3 Top Singapore REITs to Buy in 2022

Top REITs buy 2022

Tim Phillips

December 30, 2021

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For investors of Singapore stocks in 2021, it’s not been as exciting a year as those of us who were invested in the US stock market.

However, the benchmark Straits Times Index is still on course to post a respectable full-year return of over 12%.

For dividend investors, though, the iEdge S-REIT Index gives us a better gauge of the performance of Singapore-listed real estate investment trusts (REITs) – which make up a big part of the local market.

However, according to the iEdge S-REIT Index, Singapore REITs have essentially been flat the whole of this year.

Yet, REITs should occupy a portion of anyone’s portfolio given their income-generating characteristics that go well with their investment exposure to brick-and-mortar property.

While interest rates are set to rise in 2022 in the US, that’s no reason to shun REITs given quality real estate assets tend to have pricing power.

With that, here’s a quick look at three top Singapore REITs investors can buy and hold for income in 2022.

1. Parkway Life REIT

Healthcare properties owner Parkway Life REIT (SGX: C2PU) has been a stalwart of the local REIT scene since listing in 2007 at a price of S$1.28.

Giving investors exposure to unique healthcare properties in Singapore (including Mount Elizabeth Orchard), the REIT also has a portfolio of 52 Japan nursing care homes.

In fact, it’s latest acquisition in Japan was closed earlier this month and was executed at 7% below the valuation price and with an impressive net property income yield of 5.9%.

Distributions have grown consistently since Parkway Life REIT’s listing (see below) and while it only sports a forward dividend yield of 2.7%, the REIT’s income streams are near rock-solid.

Parkway Life REIT dividend

Source: Parkway Life REIT Q3 2021 earnings presentation

2. Digital Core REIT

Having covered Digital Core REIT (SGX: DCRU) in a previous article on its IPO, readers will know that this REIT has a very promising outlook.

That’s because it has a sponsor parent that is a large data centre REIT itself in the US. As a result, Digital Core REIT will have first dibs – or “right of first refusal (ROFR)” in industry parlance – on a number of top data centre assets.

With the demand for data globally only set to rise in the coming decades, data centre operators look like a solid investment in the future trends that are shaping the IT industry.

Given the strong institutional backing for the listing, investors can be assured that long-term investors feel confident enough to throw their weight behind this newly-public REIT.

While its unit price has popped by over 20% since the listing (and it’s estimated to yield less than 5% on a forward basis now), the unique assets that it offers up to investors here means that Digital Core REIT is one REIT to hold for 2022 and beyond.

3. Mapletree Industrial Trust

From a newly-listed data centre REIT to one that has been refashioned as one, Mapletree Industrial Trust (SGX: ME8U) hasn’t received much love from investors in 2021.

Yet that shouldn’t put off long-term investors focused on total returns (share price appreciation + the dividend) over the next three to five years.

That’s because Mapletree Industrial Trust has consistently grown its distribution per unit (DPU) from year to year.

In fact, over the past decade since listing the REIT has seen its DPU grow at a compound annual growth rate (CAGR) of over 5%.

With its pivot to focusing on data centres with its maiden acquisition back in 2017, just over 50% of its assets under management (AUM) are now in data centres.

The REIT’s management is looking to increase that to two-thirds over the next few years. With a solid split between Singapore and North American properties, Mapletree Industrial Trust is offering investors a forward dividend yield of over 5.1%.

Focusing on what works

While long-term dividend investors tend to want to find “value” REITs, the truth is that over the long term the best quality names are never actually that “cheap”.

As a result, the best-run and biggest REITs tend to trade at a premium to price-to-book (PB) simply because they deserve to based on their track record of generating superior shareholder returns.

So, with an uncertain 2022 globally just around the corner, it’s worth sticking to what works and where the future lies in real estate.

In that sense, Parkway Life REIT, Digital Core REIT and Mapletree Industrial Trust look like sound additions to any income portfolio in the new year.

Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips owns shares of Parkway Life REIT and Mapletree Industrial Trust.

About the Author: Tim Phillips

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. He is also a certified SGX Academy Trainer. In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.