It’s no secret that the surge in interest rates over the past two years has dented sentiment for the REIT sector.
Higher finance costs have eaten into REIT’s distributable income, causing many to report lower year-on-year distributions.
Although the US Federal Reserve has cut interest rates by 0.75 percentage points this year, the central bank may allow rates to stay higher for longer depending on the inflation outlook for 2025.
REIT investors are rightfully worried about the impact of elevated interest rates on the REITs they own.
Here are three solid Singapore REITs with attributes that should provide you with peace of mind as you navigate an uncertain macroeconomic landscape.
CapitaLand Integrated Commercial Trust (SGX: C38U)
CapitaLand Integrated Commercial Trust, or CICT, is a retail and commercial REIT with a portfolio of 26 properties worth S$24.5 billion as of 31 December 2023.
These properties are spread out across Singapore (21), Germany (2), and Australia (3).
CICT is anchored by a strong sponsor in CapitaLand Investment Limited (SGX: 9CI), a real estate manager with S$134 billion of assets under management (AUM) and S$100 billion of funds under management as of 31 March 2024.
The REIT has demonstrated remarkable resilience in the face of inflation and interest rate headwinds.
For the first half of 2024 (1H 2024), CICT saw its gross revenue rise 2.2% year on year to S$792 million.
Net property income (NPI) jumped 5.4% year on year to S$582.4 million.
Distribution per unit (DPU) edged up 2.5% year on year to S$0.0543.
This momentum has carried on as reported in CICT’s third quarter of 2024’s (3Q 2024) business update.
Revenue inched up 1.7% year on year to S$397.9 million with NPI improving by 5.4% year on year to S$289.8 million.
CICT also reported enviable operating metrics – portfolio committed occupancy stood at 96.4% as of 30 September 2024 while both its retail and office portfolios saw positive rental reversions of 9.2% and 11.7%, respectively, for the first nine months of 2024 (9M 2024).
The REIT manager is also active in acquisitions and asset enhancement initiatives (AEIs).
CICT recently announced the acquisition of a 50% stake in ION Orchard Mall along with two AEIs – one for the IMM Building in Singapore and the other for the Gallileo building in Germany.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT is a data centre REIT with a portfolio of 23 data centres across 10 countries.
Its AUM stood at S$3.9 billion as of 30 September 2024.
The data centre REIT also boasts a strong sponsor in blue-chip asset manager Keppel Ltd (SGX: BN4).
Keppel DC REIT also turned in a commendable performance for 3Q 2024.
Gross revenue grew 8.9% year on year to S$76.9 million but NPI slipped by 0.2% year on year to S$64.5 million because of higher expenses and a loss allowance on the REIT’s Guangdong data centres.
DPU for the quarter managed to eke out a 0.4% year-on-year increase to S$0.02501.
Portfolio occupancy also came in very high at 97.6% and the REIT saw its seventh consecutive quarter of positive rental reversion, including a >40% reversion for a major contract renewal in Singapore.
Keppel DC REIT recently announced the acquisition of two data centres from its sponsor for S$1.4 billion in a transaction that should lift its 1H 2024 DPU by 8.1% to S$0.0492.
The data centre sector continues to enjoy significant growth globally, with higher demand coming from generative artificial intelligence and cloud service providers.
Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust, or FCT, is a retail REIT with a portfolio of nine suburban malls and an office building.
The REIT’s AUM was approximately S$7.1 billion as of 30 September 2024.
FCT’s sponsor is real estate giant Frasers Property Limited (SGX: TQ5), which has total assets of around S$40.1 billion as of 31 March 2024.
The REIT reported a resilient set of earnings for its fiscal 2024 (FY2024) ending 30 September 2024.
Gross revenue and NPI were lower by 4.9% and 4.6% year on year, respectively, because of the divestment of Changi City Point along with the AEI conducted for Tampines 1 Mall.
Excluding these effects, revenue and NPI for FY2024 would have grown by 3.5% and 3.4%, respectively.
DPU slipped by just 0.9% year on year to S$0.12042.
FCT reported strong operating metrics that demonstrate the defensiveness of its portfolio.
Retail portfolio committed occupancy stood at 99.7% and the REIT saw a positive rental reversion of 7.7% for FY2024.
The recently completed AEI for Tampines 1 Mall saw full committed occupancy with more than 9,000 square feet of net lettable area created and deployed to prime retail floors.
The return on investment (ROI) for this AEI exceeded 8% and outperformed its target.
FCT will commence a new AEI of Hougang Mall in 2Q 2025 and will spend around S$51 million to expand the mall’s net lettable area.
The manager is targeting a 7% ROI and the AEI should be completed by 3Q 2026.
Attention Dividend Investors: Now’s the time to tap into high-yield REITs in Singapore. We’ve just released our latest report, revealing the full details on five Singapore REITs, each boasting distribution yields of 5.5% or higher. With a focus on stability and performance, these REITs could be the missing piece in your dividend-focused portfolio. Download the FREE report now to unlock these high-yield treasures.
Follow us on Facebook and Telegram for the latest investing news and analyses!
Disclosure: Royston Yang owns shares of Keppel DC REIT.
