With high interest rates set to stay (it is almost a sure thing that the Fed will not drop rates in 2023; in fact, it has signalled another 2 rate hikes), it is understandable that retail investors become more careful when investing in REITs – where those with lower gearing levels are preferred.

Speaking of which, one article published on The Business Times on Monday (26 June 2023) caught my eye – in 3 separate tables, it listed down REITs with the lowest gearing ratios, highest interest coverage ratios, and also the highest proportion of debt pegged to fixed rates. You can read the article in full here.

1. Sasseur REIT (SGX:CRPU)

Sasseur REIT has the lowest gearing ratio as at 22 June 2023, at 25.7%.

The REIT is the first retail outlet mall REIT listed in Asia. At the time of writing, its portfolio comprises 4 retail outlet malls located in the Chinese cities of Chongqing (2), Kunming (1), and Hefei (1).

Financial Performance (between FY2018 and FY2022):

The REIT has a financial year end every 31 December, and the following is its financial performance over the last 5 years – between FY2018 and FY2022:

	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022
Gross Revenue (S$’mil)	$93.5m	$118.0m	$125.2m	$134.9m	$125.9m
Distributable Income to Unitholders (S$’mil)	$60.5m	$77.9m	$78.7m	$86.2m	$80.3m

Both its EMA rental income, and distributable income to unitholders saw improvements every single year, except for FY2022 (mainly due to lockdowns and inter-city travel restrictions implemented by the Chinese Government due to the Covid-19 pandemic.)

In terms of their growth, its EMA rental income saw a compound annual growth rate (CAGR) of 6.1%, while its distributable income recorded a CAGR of 5.8% over a period of 5 years.

Portfolio Occupancy Profile (between FY2018 and FY2022):

	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022
Occupancy Rate (%)	95.2%	96.0%	93.5%	94.5%	97.2%

The REIT’s portfolio occupancy rate have remained resilient, where it has remained at above 90.0% throughout the entire 5-year period. In fact, its occupancy rate of 97.2% in FY2022 was the highest in 5 years.

Debt Profile (between FY2018 and FY2022):

	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022
Gearing Ratio (%)	29.0%	27.8%	27.9%	26.1%	27.6%

Throughout the entire 5-year period, Sasseur REIT’s gearing ratio have been maintained at below 30.0% – a very healthy debt headroom to the regulatory limit of 50.0%.

Distribution Per Unit (between FY2018 and FY2022):

	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022
Distribution Per Unit (S$’cents)	5.128 cents	6.533 cents	6.535 cents	7.104 cents	6.550 cents

As a result os a dip in its financial performance in FY2022, its distribution per unit for the financial year fell by 7.8% compared to the year before. But despite of that, over the last 5 years, its distribution per unit still managed to grow at a CAGR of 5.3%.

2. Frasers Logistics & Commercial Trust (SGX:BUOU)

Previously known as Frasers Logistics & Industrial Trust when it was listed back in June 2016, it was later renamed to Frasers Logistics & Commercial Trust in April 2020 following the REIT’s merger with Frasers Commercial Trust.

Currently, its portfolio comprises of 107 industrial and commercial properties located in 5 major developed markets – Australia, Germany, Singapore (in Alexandra Technopark) , the United Kingdom, and the Netherlands.

The REIT’s gearing level of 27.8% (as at 22 June 2023) was the 2nd lowest among the Singapore-listed REITs.

Financial Performance (between FY2017/ 18 and FY2021/22):

The REIT has a financial year end every 30 September, and in the following table, you will find its financial performance over the last 5 years – between FY2017/18 and FY2021/22:

	FY 2017/18	FY 2018/19	FY 2019/20	FY 2020/21	FY 2021/22
Gross Revenue (S$’mil)	$178.5m	$217.1m	$332.0m	$469.3m	$450.2m
Distributable Income to Unitholders (S$’mil)	$106.7m	$135.1m	$201.1m	$270.1m	$281.8m

Over the years, the REIT’s financial results saw a stable climb – where its gross revenue saw growth in 4 out of 5 years (the only year where its gross revenue declined was in FY2021/22, due to the sale of Cross Street Exchange during the year, and effects of the weaker Australian Dollar, Euro, and British Pound against the Singapore Dollar), while its distributable income improved every single year over the last 5 years.

In terms of their CAGR over a 5-year period, its gross revenue saw a CAGR of 20.3%, while its distributable income saw a CAGR of 21.4% – which is a very impressive feat.

Portfolio Occupancy (between FY2017/18 and FY2021/22):

	FY 2017/18	FY 2018/19	FY 2019/20	FY 2020/21	FY 2021/22
Occupancy Rate (%)	99.6%	99.6%	97.5%	96.2%	96.4%

Even though its portfolio occupancy have saw slight declines over the years, but it still remains very resilient, where throughout the entire 5-year period, it has been maintained at above 95.0%.

Debt Profile (between FY2017/18 and FY2021/22):

	FY 2017/18	FY 2018/19	FY 2019/20	FY 2020/21	FY 2021/22
Gearing Ratio (%)	34.6%	33.4%	37.4%	33.7%	27.4%

The REIT’s gearing level saw a huge improvement in FY2021/22, where it declined by 6.3 percentage points (pp) compared to the previous year to 27.4%.

Distribution Per Unit (between FY2017/18 and FY2021/22):

	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022
Distribution Per Unit (S$’cents)	7.19 cents	7.00 cents	7.12 cents	7.68 cents	7.62 cents

In terms of the growth in its distribution per unit, it has fluctuated over the last 5 years (where it fell in FY2018/19, as well as in FY2021/22.)

3. Paragon REIT (SGX:SK6U)

Previously known as SPH REIT, before being renamed to Paragon REIT with effect from 03 January 2023, it invests in retail properties in Singapore (in Paragon, The Clementi Mall, and The Rail Mall), and in Australia (in Westfield Marion, and Figure Grove.)

Its gearing ratio, at 29.8% as at 22 June 2023, is the 3rd lowest among all the Singapore-listed REITs.

Financial Performance (between FY2017/18 and FY2022):

The following is the retail REIT’s financial performance over the last 5 years – do note that between FY2017/18 and FY2020/21, it has a financial year end every 31 August, before its financial year being changed to 31 December with effect from FY2022 (hence, this financial year comprises of financial performance over 16 months):

	FY 2017/18	FY 2018/19	FY 2019/20	FY 2020/21	FY 2022
Gross Revenue (S$’mil)	$211.8m	$228.6m	$241.5m	$277.2m	$376.4m
Distributable Income to Unitholders (S$’mil)	$142.3m	$144.8m	$72.9m	$150.2m	$203.2m

Gross revenue improved every single year, even during FY2019/20, where Covid-19 was at its worse due to lockdowns, as a result of contribution from the newly acquired assets in Australia. Over the 5-year period, its gross revenue grew at a CAGR of 12.2%.

Distributable income to unitholders, however, fell in FY2019/20, partly due to the deferring of distributions as allowed under Covid-19 relief measures allowed by IRAS. Apart from that, the remaining years saw its distributable income to unitholders recording improvements. Over the 5-year period, the REIT’s distributable income to unitholders grew at a CAGR of 7.4%.

Portfolio Occupancy (between FY2017/18 and FY2022):

	FY 2017/18	FY 2018/19	FY 2019/20	FY 2020/21	FY 2022
Occupancy Rate (%)	99.4%	99.1%	97.7%	98.8%	98.5%

The retail mall REIT’s portfolio occupancy is a very strong one, where throughout the entire 5-year period, it has been maintained at above 95.0%.

Debt Profile (between FY2017/18 and FY2022):

	FY 2017/18	FY 2018/19	FY 2019/20	FY 2020/21	FY 2022
Gearing Ratio (%)	26.3%	27.5%	30.5%	30.3%	29.8%

Over the 5-year period, Paragon REIT’s gearing level have been maintained at around the 26% to 30% level, which is very ideal – because at this level, there is a very good debt headroom before the regulatory limit of 50% is hit.

Another positive to note about its debt profile is that, in the recent years, its gearing ratio have been on a downward decline – from 30.5% in FY2019/20 to 29.8% in FY2022.

Distribution Per Unit (between FY2017/18 and FY2022):

	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022
Distribution Per Unit (S$’cents)	5.54 cents	5.60 cents	2.72 cents	5.40 cents	7.24 cents

Apart from in FY2019/20 (as a result of the REIT retaining part of the distributable income due to Covid-19), the REIT’s distribution per unit saw growth in the remaining years. Over a 5-year period, it grew at a CAGR of 5.5%.

4. Far East Hospitality Trust (SGX:Q5T)

Far East Hospitality Trust’s gearing level at 32.0% (as at 22 June 2023), saw the REIT having the 4th lowest gearing ratio among the Singapore-listed REITs.

As the name implies, the REIT invests in hotels (for short-term stays) and serviced residences (for longer-term stays.) At the time of writing, its portfolio comprises of 9 hotels (Oasia Hotel Downtown, Oasia Hotel Novena, Rendezvous Hotel Singapore, Orchard Rendezvous Hotel, Vibe Hotel Singapore Orchard, Quincy Hotel Singapore, Village Hotel Albert Court, Village Hotel Bugis, and Village Hotel Changi) and 3 serviced residences (Adina Apartments Singapore, Village Residence Robertson Quay, and Village Residence Hougang) – all of them located in Singapore.

Financial Performance (between FY2018 and FY2022):

The REIT has a financial year end every 31 December, and the following is its financial performance over the last 5 years – between FY2018 and FY2022:

	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022
Gross Revenue (S$’mil)	$113.7m	$115.5m	$83.3m	$83.2m	$83.6m
Distributable Income to Unitholders (S$’mil)	$75.4m	$73.9m	$47.3m	$52.0m	$65.0m

Over the last 5 years, the hospitality REIT’s financial performance have fluctuated.

The biggest decline in its gross revenue and distributable income to unitholders was seen in FY2020, due to a decline in master lease rental from the hotels and serviced residences as a result of Covid-19.

Portfolio Occupancy (between FY2018 and FY2022):

	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022
Occupancy Rate – Hotels (%)	89.1%	89.1%	85.1%	79.4%	73.7%
Occupancy Rate – Serviced Residences (%)	84.1%	83.5%	83.8%	77.5%	87.5%

The occupancy rate of both its hotels and serviced residences remained stable at 80+% throughout the entire 5-year period.

For the hotels, its occupancy rate continued to remain stable despite border closures in FY2020 due to the hotels managing to secure business from companies requiring accommodation for their workers, and from the Government for isolation purposes.

Another thing to note was its occupancy rate of 73.7% recorded in FY2022, which was due to some hotels in the portfolio exiting government contracts at the end of 2021, and temporary closure of The Elizabeth Hotel for renovation and officially relaunched as Vibe Hotel Singapore Orchard in November 2022.

For the serviced residences, the stable occupancy rates were helped by a healthy base of long-stay contracts.

Debt Profile (between FY2018 and FY2022):

	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022
Gearing Ratio (%)	40.1%	39.2%	40.9%	38.3%	32.0%

The sharp decline in its gearing ratio to 32.0% in FY2022 was due to the REIT’s repayment of loans and revolving credit facilities with proceeds from the divestment of central square.

Distribution Per Unit (between FY2018 and FY2022):

	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022
Distribution Per Unit (S$’cents)	4.00 cents	3.81 cents	2.41 cents	2.63 cents	3.27 cents

Growth of the REIT’s distribution per unit over the last 5 years also fluctuated – where it fell from a high of 4.00 cents in FY2018 to a low of 2.41 cents in FY2020 before recovering in the subsequent years.

However, its distribution per unit of 3.27 cents in FY2022 was still below pre-pandemic levels (of 3.81 cents in FY2019.)

5. IREIT Global (SGX:UD1U)

Finally, coming in 5th place is IREIT Global, where its gearing ratio was 32.3% as at 22 June 2023.

IREIT Global invests in office, retail, and industrial (including logistics) properties in Europe. Currently, its portfolio comprises 5 freehold office properties in Germany, 5 freehold office properties in Spain, and 27 freehold retail properties in France.

Financial Performance (between FY2018 and FY2022):

The REIT has a financial year end every 31 December, and the following is its financial performance recorded over the last 5 years – between FY2018 and FY2022:

	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022
Gross Revenue (€’mil)	€34.8m	€35.3m	€37.8m	€52.2m	€61.7m
Distributable Income to Unitholders (€’mil)	€25.1m	€25.3m	€27.4m	€34.4m	€34.6m

Both the REIT’s gross revenue and distributable income to unitholders saw a stable growth over the last 5 years – where the former recorded a CAGR of 12.1%, and the latter at 6.6%.

Portfolio Occupancy (between FY2018 and FY2022):

	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022
Occupancy Rate (%)	98.6%	94.6%	95.8%	95.7%	88.3%

The occupancy rate of the properties in the REIT’s portfolio largely remains stable. The 7.4pp decline in FY2022 to 88.3% was due Darmstadt Campus being vacant since December 2022 as a result of the departure of its sole tenant, Deutsche Telekom.

Debt Profile (between FY2018 and FY2022):

	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022
Gearing Ratio (%)	36.6%	39.3%	34.8%	32.1%	32.0%

Its gearing ratio has been on a downward decline since reaching a high of 39.3% in FY2019, which is good to note. Also, throughout the entire 5-year period, its gearing ratio have been maintained at under 40.0%, and a good debt headroom before the regulatory limit of 50.0% is reached.

Distribution Per Unit (between FY2018 and FY2022):

	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022
Distribution Per Unit (€)	€0.359	€0.357	€0.321	€0.293	€0.269

However, its distribution per unit over the years has been on a steady downward decline largely due to a larger unit base as a result of equity fund raising exercises conducted.

Closing Thoughts

I hope after reading the contents presented above, you now have a better understanding of the 5 Singapore-listed REITs that currently have the lowest gearing ratio – which is just one of the many things we should look at before deciding whether or not to invest in a particular REIT.

Do take note that everything you have just read is purely for educational purposes only, and they do not imply and buy or sell calls for any of the REITs discussed. As always, you should do your own due diligence before you make any investment decisions.

Disclaimer: At the time of writing, I am not a unitholder of any of the 5 REITS discussed in this post.

Get Your Daily Dose of the Latest on US & SG-listed Companies (Updated Every Weekday)

Stay updated on the latest trends and developments for companies listed on the Singapore and US stock markets by visiting The Singaporean Investor's Substack page for daily updates. Check it out here...

 

Are You Worried about Not Having Enough Money for Retirement?

You're not alone. According to the OCBC Financial Wellness Index, only 62% of people in their 20s and 56% of people in their 30s are confident that they will have enough money to retire.

But there is still time to take action. One way to ensure that you have a comfortable retirement is to invest in real estate investment trusts (REITs).

In 'Building Your REIT-irement Portfolio' which I've authored, you will learn everything you need to know to build a successful REIT investment portfolio, including a list of 9 things to look at to determine whether a REIT is worthy of your investment, 1 simple method to help you maximise your returns from your REIT investment, 4 signs of 'red flags' to look out for and what you can do as a shareholder, and more!

You can find out more about the book, and grab your copy (ebook or physical book) here...