Real Estate Investment Trusts, also known as REITs, are companies that finance and make investments in income-generating real estate assets or projects such as warehouses, apartments, or shopping malls. Investors can add these properties to their investment portfolio by buying shares of a REIT.
Most REITs are publicly traded globally on major securities exchanges; therefore, investors trade them like in the stock market.
Investing in Singapore REITs now is a smart investment. Most of them have high yields that will help you generate a passive income. Unlike physical property, these REITs are liquid; you can trade on the Singapore Exchange (SGX) at any time. In addition, some of them have overseas properties that expose you to global properties.
How Does It Work?
REITs have a pretty direct structure. The company will use all the money raised by the unitholders, also referred to as the investors during the initial public offering (IPO), to buy a pool of properties. After purchasing them, these properties will be leased out to tenants, companies, or individuals.
The rental income will be distributed back to the unitholders as income, similarly to dividends paid out. Before the final payout is split among the investors, the REIT will deduct some managerial expenses, including property management fees, annual REIT managers’ fees, trustees’ fees, and other extra costs.
Apart from these deductions, some companies may also incur taxation costs, especially if they have properties in foreign jurisdictions. The income will be taxed according to the country’s specific laws. During reporting of financial statements, the companies will indicate all the information about these types of fees.
Types of REITs
1. Commercial
These are properties primarily used to conduct business, such as office buildings.
2. Retail
These REITs manage and own retail properties and rents the space to tenants. They are primarily in central business districts and upmarket areas where they focus on real estate assets such as retail space for large regional malls, grocery-anchored shopping centers, boutiques, and outlet stores.
3. Industrial
The properties under this REIT include logistics facilities, warehouses, and data centers. These companies manage and own properties used for manufacturing, storing, and distribution of goods.
4. Hospitality
Hospitality REITs are more focused on acquiring, developing, and managing hotels, serviced apartments, lodgings, motels, luxury resorts, and business class hotels. They also lease out properties to guests.
5. HealthCare
These companies own and manage several healthcare-related properties and collect rent from tenants. These can be hospitals, nursing homes, or medical office buildings.
6. REIT Exchange Traded Funds (REIT ETF)
On the other hand, REIT ETF is an investment that tracks the performance of an underlying asset of a specific REIT Index. Suppose you aren’t confident in choosing the REITs yourself. In that case, you can consider investing in REIT ETF as this will provide you with exposure to a diversified market across industries and geographies.
Top 10 Best Singapore REITs to Buy Now
Singapore REITs are a perfect investment choice if you want to start building your source of passive income. If you don’t know where to start, here’s a guide on the top 10 REITs you can buy in Singapore in 2022.
| Singapore REIT | Type | Market Cap | Distribution Per Unit(Cents Per Unit) |
| Ascendas Real Estate Investment Trust | Industrial | S$12.4 billion | 14.4 |
| Ascott Residence Trust, or Ascott REIT | Hospitality | S$3.3 billion | 3.03 |
| CapitaLand Integrated Commercial Trust | Retail & Commercial | S$14.3 billion | 6.95 |
| Frasers Centrepoint Trust | Retail | S$3.9 billion | 9.0 |
| Lendlease REIT | Retail & Commercial | S$950 million | 2.34 |
| Keppel REIT | Commercial | S$4.4 billion | 5.73 |
| Keppel DC REIT | Industrial (Data Centers) | 4.8 billion | 9.17 |
| Mapletree Industrial Trust | Industrial | S$6.6 billion | 12.2 |
| Mapletree Logistics Trusts | Industrial, Logistics | S$8.9 million | 8.1 |
| ParkwayLife REIT | Healthcare | S$2.92 billion | 13.8 |
1. Ascendas Real Estate Investment Trust (SGX: A17U)
Best in: Industrial REITs
Dividend Yield: 4.67%.
Profile
Ascendas REIT is Singapore’s most prominent industrial REIT. It owns warehouse and logistics facilities, light-industrial properties. They have also evolved into business and science parks. They recently announced that they bought 11 data centers worth S$960 million in Europe.
Why is it Popular?
Ascendas REIT is one of Singapore’s top 30 companies and part of the Straits Times Index (STI) based on its REIT portfolio and performance. This index lists companies according to how valuable they are. It also keeps up with the latest trends by providing high-quality properties for tenants at the forefront of innovation in biomedical science, technology, telecommunication, and banking.
2. Ascott Residence Trust, or Ascott REIT (SGX: HMN)
Best in: Hospitality REIT business
Dividend Yield: 2.89%.
Profile
Ascott REIT is the biggest hospitality trust in the Asia Pacific region and the eighth largest worldwide. Currently, Ascott REIT has more than S$7 billion worth of property assets globally. The Singapore REIT handles over 86 properties in 38 different cities and runs more than 16,000 residential units.
Why is it Popular
Ascott REIT is popular because it handles some of the world’s top hospitality properties. They have assets worldwide, which is perfect for investors who need to diversify into hospitality properties. It caters to business travelers with its rich portfolio of global brands among them, Ascott, Sheraton, Citadines, Courtyard by Marriott Pullman, and Doubletree by Hilton.
3. CapitaLand Integrated Commercial Trust (SGX: C38U)
Best in: Retail malls.
Dividend Yield: 3.2%.
Profile
Also known as CICT, it’s currently the third-largest REIT in Asia. It has grown its properties from three in 2002 during the first IPO to 24, including integrated developments.
Why is it Popular?
CapitaLand Integrated Commercial Trust has made a name because it can transform older buildings into innovative and trendy spaces to attract tenants. That’s their hidden value. For instance, it transformed the new Funan Mall, which has more than 200 brands, and a 70% increase in shopper traffic.
4. Frasers Centrepoint Trust (SGX: J69U)
Best in: Heartland Malls and Retail REIT
Dividend Yield: 3.6%
Profile
As a leader in retail REIT, this company has 11 retail malls in the suburbs of Singapore. They also recently purchased 63.1% of AsiaRetail. This boosts its portfolio because AsiaRetail Fund owns Century Square, Tiong Bahru Plaza, White Sands, Hougang Mall, and Tampines 1.
Why is it Popular
By running the heartland malls, the company captures a large number of the local residential population. This is because they are convenient and close to MRT stations and people’s homes. Therefore they command high foot traffic for shoppers. The brand is good in retail REITs. They have dominated this sector, with most of their malls having approximately a 95% tenancy rate.
5. Lendlease REIT (SGX: JYEU)
Best in: Shopping malls that appeal to a youthful audience
Dividend Yield: 5.1%.
Profile
Lendlease REIT is one of the newer retail REITs and got listed in 2019. Unlike the other more prominent brands, Lendlease owns only two properties, 313@Somerset and Sky Complex, a grade-A office in Italy fully leased to Sky Italia. The company also recently acquired a stake in the JEM shopping mall. It was awarded a tender to redevelop a car park set to be a dedicated event space.
Why is it Popular?
Lendlease’s portfolio of properties appeals to a younger and trendy crowd among all other Singapore REITs. Although it has smaller investments than the other companies, their tenant sales and foot traffic are at 73% and 61% higher than before Covid-19.
6. Keppel REIT (SGX: K71U)
Best in: Office Space
Dividend Yield: 4.7%
Profile
As one of the biggest office landlords, Keppel REIT manages and owns 11 office buildings in Australia, Korea, and Singapore. In Singapore alone, the company holds a stake in some of the most iconic buildings. They have a 79.9%-stake in Ocean Financial Centre, 33.3%-stake in One Raffles Quay, and Keppel Bay Tower. They also own a 99.4% stake in T Tower in South Korea and a 50% stake in five properties across Australia.
Why is it Popular?
Their high-grade office buildings attract large finance and technology companies. Their proximity and location in the CBDs appeal to more companies, contributing to a 98% occupancy on all their properties.
7. Keppel DC REIT (SGX: AJBU)
Best in: Data Centers
Dividend Yield: 3.4%
Profile
Keppel DC REIT specializes in renting out space to data centers. Listed since 2014 today, the company has 18 data centers across Asia, with 6 in Singapore.
Why is it Popular?
Due to its investments in the new digital economy, the returns and growth have been stable and consistent. Since its IPO, Keppel DC REIT tripled its free cash flow in the last year.
8. Mapletree Industrial Trust (SGX: ME8U)
Best in: Data Centers
Dividend Yield: 4.34%
Profile
Mapletree Industrial Trust is a REIT that focuses on renting properties to data centers. 40% of its properties are in this sector, with more than 27 data centers in North America. It’s one of the major industrial REITs, with about 87 properties in Singapore and more than 20 in the U.S.
Why is it Popular?
The REIT is popular because of its focus on properties in the high-tech industry. As the industry grows, it has maintained its dividend growth which is good for investors.
9. Mapletree Logistics Trust’s (SGX: M44U)
Best in: E-Commerce
Dividend Yield: 4.2%
Profile
This REIT was established in 2004 and listed on the Singapore Exchange in 2005. Their portfolio of properties started at 18 and has now grown to 156 across Asia-Pacific and Australia. Their properties are primarily used for logistics services such as distribution and warehousing.
Why is it Popular?
Among all Singapore REITs, this company has a large hold on logistics properties which is beneficial for e-commerce. Mapletree Logistics Trust has a role to play in ensuring that your online purchases are delivered.
10. Parkway Life REIT (SGX: C2PU)
Best in: Healthcare REITs
Dividend Yield: 3.3%
Profile
Also known as PLife, Parkway Life REIT owns 49 properties across Japan, including some of the best nursing homes. It also owns world-class local private hospitals, Parkway East Hospital, Mount Elizabeth Hospital, and Gleneagles Hospital in Singapore.
Why is it Popular?
Healthcare is essential. As one of the top healthcare REITs, it’s popular because it provides some of the best properties for top private hospitals.
8 Tips When Comparing REITs
Before you invest in a REIT, here’s what you need to consider first.
1. Yield Between 5% and 9%
When investing in a REIT, you should go for one that has a property yield between 5% and 9%. Yields get this high because the companies are required to redistribute about 90% of their taxable income after accounting for fees, such as REIT management fees and property management fees.
2. Industry
Industrial, logistics, and commercial REITs are some of the best performing in Singapore. They were not heavily affected by changes in the economy during the pandemic. Therefore, you should choose an industry to invest in wisely, based on how it gets affected by the economy. For instance, during the pandemic, healthcare REITs were also in demand.
3. Debt to Equity Ratio (D/E)
When selecting REITs to invest in, it’s advisable to go for companies with D/E ratios below 60%
4. Acceptable Price-To-Book Value Ratio (PB/V)
If the price-to-book value ratio is high, there’s a high investor worth. If it’s low, there’s potential growth.
5. Growth in Distribution per Unit
Also, check the DPU of a property before investing your money in a specific company. Growth or decline should indicate how the company is performing.
6. Healthy Portfolio Occupancy Rate
Tenancy and occupancy rate equates to rental income. Therefore a higher tenancy means the property is earning more. Most of the top companies have an occupancy of above 90%.
7. Growth in Gross Revenue and Net Property Income
As an investor, you should also check whether the REITs’ gross revenue and net property income are improving or declining.
8. 5x the Interest Coverage Ratio
A good REIT to invest in has five times the interest coverage ratio. Therefore, it’s best to confirm the interest rate before proceeding.
Our Verdict
Investing in Singapore REITs is one of the ways to earn a passive income. The top brands in Singapore have invested in a portfolio of high-income properties across the globe, which is beneficial for their investors.
When choosing to invest in this sector, it’s advisable to consider key factors such as the industry, expected yield, and tenancy rate. Investing in high quality and the top-performing company guarantees your wealth generation.
Takeaway
- REITs have a track record of stable and consistent dividend yields.
- Singapore REITs are a safer investment and a good defense against inflation and changes in the economy.
- This investment is an excellent choice if you want to save up for retirement.
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