REITs have had a hard time in the past year as they had to grapple with a combination of high interest rates and soaring inflation.
Notwithstanding these challenges, some REITs with quality portfolios have been able to hold their own even as distributable income may take a temporary dip.
Income-seeking investors need to look carefully at both the sponsor and portfolio of properties that each REIT owns.
If the underlying properties are well-located and resilient, then rental income should remain stable or even increase despite the headwinds.
Because of the weak sentiment toward the REIT sector, a group of REITs has seen their distribution yields heading higher as their unit prices tumbled.
We highlight five Singapore REITs with distribution yields of 6.5% or higher that you may wish to include in your buy watchlist.
AIMS APAC REIT (SGX: O5RU)
AIMS APAC REIT, or AAREIT, is an industrial REIT with a portfolio of 29 properties, of which 26 are located in Singapore and three in Australia.
For the fiscal year 2023 (FY2023) ending 31 March 2023, the REIT saw gross revenue jump 17.6% year on year to S$167.4 million.
Net property income (NPI) increased by 18.7% year on year to S$122.5 million while distribution per unit (DPU) edged up 5.1% year on year to S$0.09944.
Units of AAREIT offer a trailing distribution yield of 7.5%.
The REIT’s portfolio occupancy stood high at 98% with healthy positive rental reversion of 18.5%.
Its aggregate leverage has also fallen from 37.5% in FY2022 to 36.1% with 88% of its borrowings hedged to fixed rates.
Starhill Global REIT (SGX: P40U)
Starhill Global REIT, or SGREIT, owns a portfolio of nine mid-to-high-end retail properties in six cities in the Asia Pacific region.
The REIT’s portfolio value stood at approximately S$2.9 billion as of 31 March 2023.
For SGREIT’s fiscal 2023’s third quarter (3Q FY2023), gross revenue dipped slightly by 2.3% year on year to S$47.3 million while NPI slipped by 1.3% year on year to S$38 million.
The decline was mainly due to currency weakness and also the divestment of Daikanyama mall in Japan.
SGREIT’s portfolio occupancy stayed healthy at 96.7% and its gearing was at 37.1% as of 31 March 2023.
The REIT’s DPU for 1H FY2023 improved slightly by 2.2% year on year to S$0.0182.
The annualised DPU for the retail REIT stood at S$0.0364, giving its units a forward distribution yield of 7.1%.
Lendlease Global Commercial REIT (SGX: JYEU)
Lendlease Global Commercial REIT, or LREIT, has a portfolio comprising Jem and 313@Somerset in Singapore and Sky Complex, three grade A office buildings, in Milan.
These five properties had an appraised value of S$3.6 billion as of 30 June 2022.
LREIT released an encouraging business update for 3Q FY2023 with a committed portfolio occupancy of 99.8%.
The portfolio also had a long weighted average lease expiry of 8.3 years and enjoyed both retail and office rental reversions of 3.3% and 4%, respectively.
Gearing ratio came in at 39.3% but the average cost of debt stood low at 2.51%.
LREIT paid out a DPU of S$0.0245 for 1H FY2023, up 2.1% year on year.
The annualised DPU stands at S$0.049 and units of the REIT give a forward distribution yield of 7.3%.
Sasseur REIT (SGX: CRPU)
Sasseur REIT owns a portfolio of four outlet malls located in Chongqing, Kunming, and Hefei in China.
The retail REIT reported a commendable performance on the release of its 2023’s first quarter (1Q 2023) business update.
Outlet sales jumped nearly 18% year on year to RMB 1.3 billion while total rental income rose 7.7% year on year to RMB 170.6 million.
DPU inched up 1.5% year on year to S$0.01849.
Sasseur REIT’s trailing 12-month DPU stood at S$0.06577, giving its units a trailing 12-month distribution yield of 8.9%.
Aggregate leverage stood low at 25.7% and the REIT has a sizable debt headroom of S$861.2 million.
However, the weighted average cost of debt moved upwards from 4.9% in 2022 to 5.9% in 1Q 2023.
OUE Commercial REIT (SGX: TS0U)
OUE Commercial REIT, or OUECR, is a diversified REIT with seven properties covering the commercial and hospitality sectors in Singapore and Shanghai.
Total assets stood at S$6 billion as of 31 December 2022.
OUECR saw its revenue rise 14.9% year on year to S$68.4 million in 1Q 2023, driven by higher contributions from Hilton Singapore Orchard and its Singapore commercial properties.
NPI climbed 18% year on year to S$56.6 million.
However, the REIT did warn of steep interest rate hikes that look poised to impact DPU for 2023.
For 2022, OUECR paid out a DPU of S$0.0212, 18.5% lower than a year ago.
This level of DPU translates to a historical distribution yield of 6.5% for the commercial cum hospitality REIT.
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 does not own shares in any of the companies mentioned.