There are a total of 7 REITs included in Singapore’s benchmark Straits Times Index.
In the table below, you’ll find its distribution payout for the latest financial year (along with its financial year end in brackets), its traded price (as at close on 05 October 2022), along with its distribution yield:
(as at 05
|Keppel DC REIT|
Looking at the distribution yields above, I’m sure you’d agree with me that at that current prices and also their full-year payout, they certainly look very attractive (best part, there’s no need for you to queue for hours outside a bank to enjoy such attractive yields for your investment.)
Despite of that, REITs in general have ‘lost love’ among investors in recent months (and their unit price movements have continued to remain weak) for 2 reasons – interest rate hikes (and fears that their current distribution cannot be sustained), along with potential slowdown in terms of growth as a result of lack of acquisitions (due to increase in funding costs.)
Here are my thoughts about each of them:
i. Interest Rate Hikes (and Sustainability of Current Distribution) – No doubt an increase in borrowing costs may affect distribution payouts to a certain extent, but from my understanding, they are just at low single digit percentage, which in my opinion, the impact is minimal (its still much better than putting your money in the bank, where the interest rates are way lower); Also, many of the REITs have a huge percentage of their borrowings hedged at fixed rates (you can check out the table below for the exact percentages – all of them as at 30 June 2022) – as such, in the near-term, impact of interest rate hikes on the REITs will be minimised;
|% of Borrowings on|
(as at 30 June 2022)
|CapitaLand Ascendas REIT |
Commercial Trust (SGX:C38U)
& Commercial Trust (SGX:BUOU)
|Keppel DC REIT|
|Mapletree Industrial Trust|
|Mapletree Logistics Trust|
|Mapletree Pan Asia |
Commercial Trust (SGX:N2IU)
ii. Lack of Acquisitions – Considering the increase in funding costs, and the current economic headwinds, I’m not surprised by the REITs slowing down their pace of acquisitions (and hence a potential slowdown in terms of their financial performance growth.) More importantly, we need to know that events like this is just temporary (remember the saying, ‘bad times don’t last, only good times do.’) and I’m sure once the economic situation turns for the better (it’ll eventually be, just like how it has been over the past decades), the REITs’ management will resume their acquisition activities (and improvements will once again be seen in terms of its financial performance and distribution payout.) We just need to be patient.
I hope the information presented above will help to allay some of the concerns you may have about investing in the REITs – Personally, I’m invested in 6 out of the 7 blue-chip REITs (the only REIT which I do not have unitholding in is Frasers Logistics & Commercial Trust) and I fully intend to continue staying invested in them. In fact, I’m even looking at increasing my unitholding in some of them to bring down my average invested price, and in so doing, bringing up the distribution yield.
However, despite having said all of that, do note that the above sharing is purely for information purposes only, and they do not represent any buy or sell calls for any of the REITs mentioned. You’re strongly advised to do your own due diligence before making any investment decisions.
Disclaimer: At the time of writing, I am a unitholder of CapitaLand Ascendas REIT, CapitaLand Integrated Commercial Trust, Keppel DC REIT, Mapletree Industrial Trust, Mapletree Logistics Trust, and Mapletree Pan Asia Commercial Trust.
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