2021 was an interesting year for REITs.
For the first time since 2017, new REIT ETFs were listed on the Singapore Exchange (SGX: S68).
Speaking of new additions, two REITs also made their debuts on the local bourse, with the listing of Digital Core REIT (SGX: DCRU) leading the way as the largest IPO of this year.
Investors who were looking forward to better economic conditions were well-rewarded for their efforts.
Despite some hiccups, most REITs have managed to navigate the uncertain environment to deliver double-digit total returns to unitholders.
Here are the top five performers of the year.
Note: Share prices are compiled as of 30 November 2021, with gains inclusive of distributions.
Number One: ARA LOGOS Logistics Trust (SGX: K2LU)
ARA LOGOS Logistics Trust, or ARALT, is an industrial REIT that manages 29 properties across Singapore and Australia, valued at S$1.8 billion as of 30 September 2021.
ARALT delivered a total return of 57.5% in 2021.
Industrial REITs have shown resilience throughout the pandemic, buoyed by demand drivers such as e-commerce, vaccine and food storage requirements.
In its third quarter business update for 2021, ARALT reported net property income (NPI) of S$26.1 million, a healthy year on year growth of 13.9%.
The solid performance could be an ideal swansong for ARALT.
The REIT has announced plans for a merger with ESR-REIT (SGX: J91U) to form ESR-LOGOS REIT, in a bid to become Singapore’s fifth-largest industrial REIT by asset size.
If the deal is approved by shareholders, ARALT will be delisted from the SGX in February 2022.
Number Two: First REIT (SGX: AW9U)
First REIT is Singapore’s first healthcare REIT and manages a property portfolio worth S$939.7 million as of 30 June 2021.
The REIT’s portfolio predominantly consists of hospitals in Indonesia, while it also manages three nursing homes in Singapore and a hospital in South Korea.
First REIT ended 2020 on a depressing note.
After announcing a lease restructuring of its Indonesian hospital assets, the REIT’s unit price fell as much as 48% in a few weeks at the tail end of the year.
Fortunately for the REIT, it has managed to stabilise the situation.
NPI for the first nine months of 2021 decreased slightly by 2.2% year on year, although DPU plunged by 41.1% year on year due to a large issuance of new rights units.
Despite the weaker financial performance, the REIT managed to deliver a total return of 48.9% as its unit price rebounded with more certainty on its future.
The REIT has also announced a new growth strategy going into 2022, starting with the acquisition of 12 nursing homes in Japan.
Number Three: Sabana Industrial REIT (SGX: M1GU)
Sabana Industrial REIT invests in a portfolio of 18 industrial properties valued at S$862.2 million.
The bulk of its portfolio consists of high-tech industrial properties, with the remainder made up of other warehousing and logistical buildings.
Sabana REIT reported strong performance during the year.
For the half-year ended 30 June 2021, NPI grew 23.2% year on year, and the REIT more than tripled its DPU from S$0.0047 in 1H20, paying out S$0.0148.
Even after adjusting for distributions withheld to conserve capital in 2020, the 1H21 DPU would have grown by 41% year on year.
In line with the good performance, the REIT’s total return for the year stood at 34.3%.
2021 also saw a significant change for the REIT, as it removed its Shari’ah compliance status.
The move allows Sabana REIT to gain access to a wider pool of lenders and tenants, freeing itself from a revenue cap of 5% on tenants carrying out Islamic non-permissible activities such as selling alcohol or tobacco.
Number Four: Starhill Global REIT (SG: P40U)
Starhill Global REIT owns a portfolio of 10 office and retail properties in Singapore, Australia, Malaysia, China and Japan.
As of 30 September 2021, the REIT’s portfolio was valued at S$3 billion.
Singaporeans will be familiar with two of the REIT’s landmark properties, Ngee Ann City and Wisma Atria.
The two malls are located at the heart of Singapore’s shopping district, and together, contribute 62.9% of the REIT’s gross revenue for its fiscal 2021 ended 30 June 2021.
This heavy concentration worked against the REIT during the height of the pandemic in 2020 as shopper traffic plunged due to movement and capacity restrictions.
But the REIT managed to ride out the troubles and reported a high retail portfolio occupancy of 97.8% as of 30 September 2021.
Armed with a better outlook for retail REITs, Starhill Global managed to reward unitholders with a total return of 32.6% in 2021.
Starhill Global also launched a re-positioning strategy for Wisma.
The mall welcomed popular food & beverage brands such as Haidilao (SEHK: 6862), Mr Coconut and Roti Mum in 2021, and will spend S$15 million on interior upgrading works to maintain its appeal to shoppers.
Number Five: Parkway Life REIT (SGX: C2PU)
Parkway Life REIT is a healthcare REIT that manages a portfolio of three private hospitals in Singapore, 51 nursing homes in Japan, and one medical centre in Malaysia.
As of 30 September 2021, the REIT’s assets under management stood at S$2.3 billion.
Parkway Life REIT is one of the most consistent performers on the SGX, having raised its core DPU every year since its listing in 2007.
2021 was no exception, and the reliability of its distributions, along with the renewal of its master lease agreements, contributed to a total return of 31.5% in the year.
Although NPI fell slightly by 2.9% year on year for the latest quarter, the REIT’s announced a distribution of S$0.0356, 0.8% higher than the same period a year ago.
The dip in NPI was attributed to depreciation of the Japanese Yen, one-off allowance for doubtful debt, and loss of income from a divested property.
But with Singapore and Japan both facing greying populations, demand for quality healthcare facilities promises to remain strong, leaving Parkway Life REIT well-poised to maintain its excellent track record.
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Disclosure: Herman Ng does not own shares in any of the companies mentioned.