The REIT sector has grown by leaps and bounds since the introduction of the very first REIT, CapitaMall Trust, more than two decades ago.
REITs are favoured by income investors for their stream of dependable dividends that they pay out either quarterly or half-yearly.
With the explosion in the number of REITs, it is also crucial for investors to be discerning as to which REIT they choose to include in their portfolio.
When scouting for appropriate REITs, you should look for what is known as the three “R”s – results, recession-proof and resilience.
Results point to a REIT’s track record of increasing its distribution per unit (DPU) and asset base over time.
Recession-proof refers to the properties within the REIT belonging to a sector that can withstand downturns.
Resilience means that the REIT can bounce back from adversity to achieve even stronger results.
Here are four Singapore REITs with these three attributes that you can consider adding to your buy watchlist.
Parkway Life REIT (SGX: C2PU)
Parkway Life REIT is a healthcare REIT that owns a portfolio of 61 properties worth around S$2.2 billion as of 31 December 2022.
The assets comprise three hospitals in Singapore, 57 nursing homes in Japan, and strata-titled lots/units in MOB Specialist Clinic in Kuala Lumpur, Malaysia.
The healthcare REIT has chalked up an impressive track record of rising DPU, and its core DPU increased without fail since 2008.
DPU climbed from S$0.0683 back in 2008 to S$0.1408 in 2021.
2022 saw DPU rise by 2.1% year on year to S$0.1438, continuing the REIT’s unbroken streak of increases.
Parkway Life REIT’s business is recession-proof as its nursing homes in Japan allow it to provide quality aged care to the country’s silver economy.
Back in Singapore, its hospitals should also see healthy demand for patients with economies fully reopened as more people trickle back for elective surgeries and health check-ups.
Mapletree Logistics Trust (SGX: M44U)
Mapletree Logistics Trust, or MLT, is a logistics REIT with a portfolio of 186 properties across eight countries with assets under management (AUM) of S$12.6 billion as of 31 December 2022.
The REIT is anchored by a strong sponsor in Mapletree Investments Pte Ltd, a unit of Temasek Holdings, lending it sufficient resilience to tide through tough times.
MLT also has a proven track record of DPU performance, with DPU posting a consistent rise of S$0.0738 from fiscal 2016 (FY2016) to S$0.08787 in FY2022.
For the first nine months of fiscal 2023 (9M FY2023), MLT saw gross revenue climb 11.3% year on year to S$551.7 million while net property income (NPI) increased 10.4% year on year to S$480.4 million.
DPU carried on rising, edging up 3.4% year on year to S$0.06743 from S$0.06519 in 9M FY2022.
Logistics facilities remain in high demand as the boom in e-commerce caused by the pandemic looks here to stay.
This trend will ensure that MLT’s properties remain relatively recession-proof even if a sharp slowdown hits the economy.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT is a data centre REIT that owns 23 data centres across nine countries worth S$2.7 billion as of 31 March 2023.
The REIT has a reputable sponsor in Keppel T&T, itself a wholly-owned subsidiary of blue-chip conglomerate Keppel Corporation Limited (SGX: BN4).
The data centre REIT has announced an unbroken run of DPU increases, starting at S$0.0651 in 2015 and ending at S$0.10214 in 2022.
For the first quarter of 2023, Keppel DC REIT continued to report a commendable set of earnings, with DPU rising further by 3% year on year to S$0.02541.
There are reasons to believe that the data centre sector should see continued strong demand that should ensure it is insulated from economic headwinds.
Demand for data will be driven by long-term trends such as cloud computing and also generative artificial intelligence programs such as ChatGPT.
Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust, or FCT, is a retail REIT that owns a portfolio of 10 suburban malls in Singapore along with one office building as of 31 December 2022.
The REIT’s sponsor, Frasers Property Limited (SGX: TQ5), is a real estate giant with an AUM of approximately S$40.2 billion as of 30 September 2022.
For FY2022 ending 30 September 2022, the REIT saw its gross revenue rise 4.6% year on year to S$356.9 million while NPI increased by 4.9% year on year to S$258.6 million.
DPU inched up 1.2% year on year to S$0.12227.
FCT saw a sharp dip in DPU at the onset of the pandemic in FY2020 but DPU quickly rebounded, with FY2022’s DPU exceeding the pre-COVID level of FY2019’s S$0.1207.
This performance shows the retail REIT’s resilience as their suburban malls attract footfall from heartlanders living in HDB estates.
For the first quarter of FY2023 ending 31 December 2022, FCT continued to report a 13.4% year on year increase in tenant sales and a 38.3% year on year jump in footfall.
The REIT recently acquired a 50% stake in NEX mall in Serangoon along with an additional 10% stake in Waterway Point.
These acquisitions should help to boost DPU moving forward and enhance FCT’s resilience.
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Disclosure: Royston Yang owns shares of Keppel DC REIT.