The REIT sector is facing the twin headwinds of high inflation and surging interest rates.
Investors are understandably worried about whether REITs can maintain their distributions considering these challenges.
While it is true that most REITs will encounter higher finance and operating costs, the silver lining is that tough times will not last.
By owning solid REITs with strong sponsors, income-seeking investors can still enjoy a steady stream of passive income that goes straight into their bank accounts.
Here are four reliable Singapore REITs that can help you breeze through the economic storm to emerge unscathed in 2024.
Frasers Logistics & Commercial Trust (SGX: BUOU)
Frasers Logistics & Commercial Trust, or FLCT, owns a portfolio of 107 industrial and commercial properties spread across Singapore, Australia, the UK, Germany, and the Netherlands.
The REIT’s assets under management (AUM) stood at S$6.4 billion as of 30 September 2023.
FLCT has a strong sponsor in property giant Frasers Property Limited (SGX: TQ5), which had S$40.1 billion of AUM as of 31 March 2023.
The REIT was impacted by weaker exchange rates and higher finance and operating costs for its fiscal 2023 (FY2023) ending 30 September 2023.
Revenue dipped by 6.5% year on year to S$420.8 million while distribution per unit (DPU) fell by 7.6% year on year to S$0.0704.
Things could be looking up shortly.
FLCT reported a strong positive rental reversion of 18.9% for FY2023 with healthy portfolio occupancy of 96%.
The REIT’s forward funding acquisition in the UK, Ellesmere, looks slated for completion in December 2023 and will add to rental income thereafter.
The manager also announced the forward funding acquisition of a logistics development in the Netherlands at a 12.7% discount to valuation that will be completed on 1 November 2024.
With an aggregate leverage of 30.2% and a low cost of debt of just 2.2%, FLCT has sufficient debt headroom to conduct more yield-accretive acquisitions in the coming year.
CapitaLand Integrated Commercial Trust (SGX: C38U)
CapitaLand Integrated Commercial Trust, or CICT, has a portfolio of 21 properties in Singapore, two in Frankfurt, and three in Sydney with a total AUM of S$24.2 billion as of 31 December 2022.
The REIT has a reputable sponsor in CapitaLand Investment Limited (SGX: 9CI), which has S$133 billion of property AUM and S$89 billion of funds under management as of 31 March 2023.
For the first half of 2023 (1H 2023), CICT reported an improvement in gross revenue to S$774.8 million from S$687.6 million a year ago.
Net property income (NPI) increased by 10.1% year on year to S$552.3 million while DPU inched up 1.5% year on year to S$0.053.
The REIT’s business update for its third quarter (3Q 2023) saw revenue for the first nine months of 2023 (9M 2023) rise 9.8% year on year to S$1.2 billion.
NPI improved by 6.8% year on year to S$827.3 million.
Investors can look forward to a better DPU for 2H 2023 if CICT can keep up this performance.
Parkway Life REIT (SGX: C2PU)
Parkway Life REIT, or PLife REIT, is a healthcare REIT with a portfolio of 61 properties comprising three Singapore hospitals, 57 Japanese nursing homes, and strata-titled lots/units in a specialist centre in Malaysia.
The AUM stood at S$2.2 billion as of 30 September 2023.
PLife REIT has a strong sponsor in IHH Healthcare Berhad (SGX: Q0F), an integrated healthcare provider that owns hospitals under renowned brands such as Parkway, Acibadem, Fortis, and Gleneagles.
For 9M 2023, the healthcare REIT’s gross revenue jumped 24.6% year on year to S$110.9 million.
NPI increased by 26.2% year on year to S$104.5 million with DPU edging up 2.8% year on year to S$0.1099.
The REIT had just concluded the purchase of two nursing homes in Japan for a total of S$16.4 million that should help to boost DPU in future quarters.
The manager intends to establish a multi-prong growth platform to help the REIT to grow both its asset base and DPU over time.
It intends to expand its presence in Japan while establishing a third key market that can contribute to PLife REIT’s rental income in the medium term.
At the same time, the REIT will foster partnerships with leading property players for collaborative expansion opportunities.
Mapletree Logistics Trust (SGX: M44U)
Mapletree Logistics Trust, or MLT, is an industrial REIT with a portfolio of 189 properties in eight countries with an AUM of S$13.3 billion as of 30 September 2023.
MLT is anchored by a solid sponsor in Mapletree Investments Pte Ltd, a real estate development, management, and investment company with S$77.4 billion of assets as of 31 March 2023.
The logistics REIT reported a commendable set of results for the first half of fiscal 2024 (1H FY2024) ending 30 September 2023.
Gross revenue dipped by 0.7% year on year to S$368.9 million while NPI fell by 1% year on year to S$320.1 million.
Despite these declines, DPU inched up 0.5% year on year to S$0.04539.
MLT reported an average positive rental reversion of 0.2% for the quarter with portfolio occupancy clocking in high at close to 97%.
The REIT manager concluded the acquisition of eight properties worth S$904.4 million during the fiscal year, and these assets should contribute to rental income moving forward.
There is also an ongoing project to increase the gross floor area of a property at 51 Benoi Road by around 2.3 times.
This project should be completed by the first quarter of 2025.
MLT is also active in asset recycling.
Within a week, the REIT announced the sale of 10 Tuas Avenue 13 in Singapore and the divestment of two properties in Malaysia.
Not sure which REIT to put your money in? Use our 7-step REIT checklist to find one that fits into your retirement plan. Checklist is inside our latest FREE report “Singapore REITs Retirement Plan”. Click here to download it now.
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Disclosure: Royston Yang owns shares of Frasers Logistics & Commercial Trust.
