REITs are a great vehicle for passive income as they churn out consistent dividends to enjoy tax benefits.
When it comes to choosing a good REIT to invest in, it would seem that “bigger is better”.
Not only will the REIT have better negotiating power, but it will also attract the attention of larger funds, thereby improving liquidity.
The next attribute to look for is whether the REIT is anchored by a strong sponsor.
Good sponsors not only allow the REIT to borrow at more attractive interest rates but may also provide a pipeline of properties that can be injected into the REIT for future growth.
Well-managed REITs can also consistently raise their distribution per unit (DPU) and possess high-quality, well-located assets that enjoy strong demand from tenants.
We introduce four attractive REITs that you can consider adding to your buy watchlist.
Parkway Life REIT (SGX: C2PU)
Parkway Life REIT, or PLife REIT, is a healthcare REIT with a portfolio of 61 properties worth S$2.2 billion as of 31 December 2022.
The REIT owns three hospitals in Singapore, 57 nursing homes in Japan, and strata-titled units/lots in a specialist clinic in Malaysia.
PLife REIT is a S$2.3 billion REIT that has seen its share price increase by 41.3% over the past five years.
The REIT has a strong sponsor in IHH Healthcare Berhad (SGX: Q0F), a healthcare giant with 83 hospitals in over 10 countries.
Its core DPU growth has been impressive, with never a down year since the REIT was listed back in 2007.
Core DPU has risen from S$0.0683 in 2008 to S$0.1438 in 2022.
In addition, PLife REIT’s assets are also recession-proof as they comprise healthcare facilities such as hospitals and nursing homes.
For its 2023’s first quarter (1Q 2023), gross revenue jumped 21.7% year on year to S$37.3 million while DPU inched up 2.5% year on year to S$0.0365.
Mapletree Logistics Trust (SGX: M44U)
Mapletree Logistics Trust, or MLT, is an industrial REIT with a portfolio of 185 properties spread across eight countries with total assets under management (AUM) of S$12.8 billion as of 31 March 2023.
MLT has a strong sponsor in Mapletree Investments Pte Ltd, a leading real estate development, investment and management company with an AUM of S$78.7 billion as of 31 March 2022.
The logistics REIT’s DPU has also seen a steady, uninterrupted climb since its fiscal 2016 (FY2016) ending 31 March 2016.
DPU went from S$0.0738 in FY2016 to S$0.09011 for FY2023.
For FY2023, DPU continued to rise on the back of the manager’s active portfolio rejuvenation and recycling strategies.
Logistics properties are also constantly in demand due to the boom in e-commerce caused by the pandemic, and MLT’s occupancy rate stood at a high 97% as of 31 March 2023.
In addition, the portfolio also enjoyed a revaluation gain for FY2023 and saw an average positive rental reversion of 3.1% for its latest quarter.
Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust, or FCT, is a retail REIT with a portfolio of 10 retail malls and an office building.
The portfolio’s AUM stood at approximately S$6.9 billion as of 31 March 2023.
FCT is anchored by a strong sponsor in property giant Frasers Property Limited (SGX: TQ5).
FCT’s DPU had risen without a pause from FY2007 (ending 30 September 2007) through to FY2020 when the pandemic broke out.
DPU went from S$0.0655 in FY2007 to S$0.1207 in FY2019 but fell to S$0.09042 in FY2020 when movement restrictions were imposed.
The REIT has recovered strongly as its retail malls continue to be popular with heartlanders who shop there for necessities.
By FY2022, DPU had risen back to S$0.12227, a record-high level for the REIT.
For the first half of FY2023, revenue rose 6.5% year on year to S$187.6 million but DPU remained flat year on year at S$0.0613 despite the macroeconomic challenges.
CapitaLand Integrated Commercial Trust (SGX: C38U)
CapitaLand Integrated Commercial Trust, or CICT, is a retail cum commercial REIT with 21 properties in Singapore, two in Germany, and three in Australia.
The total AUM for the REIT stood at S$24.2 billion as of 31 December 2022.
CICT has a strong sponsor in CapitaLand Investment Limited (SGX: 9CI).
It also grew its DPU from S$0.104 in 2021 to S$0.1058 in 2022.
The REIT reported an impressive business update for 1Q 2023 where it saw a double-digit year on year increase in net property income.
This increase paves the way for CICT to continue raising its DPU as its malls and commercial properties enjoy better footfall and tenant demand.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.