Some call it home bias.
But there are many reasons why Singapore investors prefer to put their money into real estate investment trusts (REITs), particularly those with properties located within our shores.
For starters, Singapore REITs offer an opportunity to invest in multiple properties with a relatively small amount of money.
By staying local, investors avoid dealing with foreign exchange conversions.
There are plenty of property choices too, ranging from retail, commercial, and hospitality.
Considering these points, let’s delve into five Singapore REITs that predominantly, if not entirely, earn their income from properties located in the city-state.
These REITs present attractive investment opportunities due to their strong local market presence and potential for stable returns.
1. Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust (FCT) primarily invests in retail malls situated in the heartlands across Singapore.
As of the fiscal year ending September 2023 (FY2023), FCT’s portfolio consisted of 10 retail malls and one office property in the Lion City, valued at nearly S$7 billion.
The Singapore REIT’s recent performance has been decent.
For FY2023, gross revenue increased by 3.6% year on year to around S$370 million, driven by improved occupancy rates, higher rental income from new and renewed leases, and increased atrium income.
Meanwhile, property operating expenses rose by almost 6% year on year to S$104.1 million due to higher maintenance, utilities expenses, and staff costs, resulting in a net property income increase of 2.7% year on year to S$265.6 million.
FCT’s distribution per unit (DPU) did fall, but by a relatively minor 0.6% year on year to S$0.1215.
The culprit was higher financing costs.
2. Far East Hospitality Trust (SGX: Q5T)
For hospitality, there’s Far East Hospitality Trust (FEHT) which owns hotels and serviced residences in Singapore.
As of the end of 2023, FEHT’s portfolio consisted of 12 properties, encompassing over 3,000 hotel rooms and serviced residence units, with a total valuation of about S$2.5 billion.
The REIT’s performance has improved alongside increased tourism and business travel.
For 2023, FEHT’s gross revenue surged by about 28% year on year to S$106.8 million, driven by higher master lease rentals from hotels and serviced residences, as well as increased revenue from retail and office spaces.
This revenue increase resulted in the business trust’s net property income rising by around 28% year on year to nearly S$99 million.
Consequently, FEHT’s distribution per stapled security (DPS) increased by a little over 25% year on year to S$0.0409.
3. CapitaLand Integrated Commercial Trust (SGX: C38U)
CapitaLand Integrated Commercial Trust (CICT), the largest REIT in Singapore by market capitalisation, is host to a collection of retail and office properties.
As of the end of 2023, CICT’s portfolio included 21 properties in Singapore, two in Germany, and three in Australia, with a total property value of S$24.5 billion.
CICT is one of the few REITs that managed to increase their DPU for the latest quarter.
For 2023, gross revenue increased by approximately 8% year on year to S$1.56 billion, with nearly 93% of this revenue coming from its 21 commercial properties in Singapore.
This topline growth was driven by full-year contributions from the three newly acquired properties in Australia and improved performance from its existing properties.
However, property operating expenses were 11.4% higher than a year ago due to costs associated with the Australian properties, as well as higher utilities, maintenance, and marketing expenses.
The end result is a 7% year on year increase in net property income to S$1.12 billion.
CICT’s 2023 DPU increased by 1.6% year on year to S$0.1075.
4. Paragon REIT (SGX: SK6U)
Like CICT, Paragon REIT also owns properties in Singapore and Australia.
In both cases, the focus is on retail.
As of the end of 2023, its portfolio is home to three properties in Singapore and two in Australia.
For 2023, the REIT experienced a 1.8% increase in gross revenue compared to a year ago, reaching just under S$290 million, with a little over 77% of its revenue coming from its Singapore properties.
Net property income rose by 1.7% year on year to just over S$215 million.
However, over the same period, Paragon REIT’s DPU for 2023 fell by around 9% to S$0.0502, due to higher financing cost.
5. Lendlease Global Commercial REIT (SGX: JYEU)
Finally, we have Lendlease Global Commercial REIT (LREIT), which focuses on retail and office properties located in Singapore and Italy.
At the end of the fiscal year ended 30 June 2023 (FY2023), its portfolio includes popular malls such as Jem (an integrated office and retail mall) and 313@Somerset (a retail mall) in Singapore, as well as Sky Complex (an office building) in Italy, with a total value of S$3.65 billion.
Recent results have been decent.
Gross revenue surged by two-folds from around S$102 million to S$204.9 million, driven by a full-year contribution from Jem and improved rental income, with nearly 90% of this revenue coming from the two Singapore properties.
Net property income also doubled compared to the previous year to about S$154 million.
That said, due to higher financing costs, its DPU decreased by 3.2% year on year to S$0.047.
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Disclaimer: Lim Jun Yuan owns shares of CapitaLand Integrated Commercial Trust and Frasers Centrepoint Trust.
