Against the backdrop of a rising interest rate environment, REITs seem to be one of the obvious losers. This is because REITs are asset-heavy investments that require high levels of leverage, borrowing substantial amounts of money to purchase properties that they subsequently rent out.
In Singapore, there are currently 39 listed REITs and a further nine business trusts (of which six are property related). On average, they have a debt to asset ratio of just under 35%. With rising interest rates, REITs will have to fork out more in interest payment, potentially reducing the distributions they can pay to investors.
How REITs Have Performed In YTD 2018
To gauge the performance of REITs in 2018, we can look to two indexes in Singapore – the S-REIT Index, an index of all REITs listed in Singapore, and the S-REIT 20 Index, an index of the top 20 REITs listed in Singapore respectively.
In the year-to-date (YTD), the S-REIT Index has declined close to 9.5%, while the S-REIT 20 Index has declined close to 8.8%, depicted in the two charts below. What this tells us is that while all REITs likely declined in prices in YTD 2018, the 20 largest and most liquid REITs, performed better than others.
Do note that prices do not represent the total return of REITs as they typically pay out good distributions to investors.
Another way to look at how REITs have perform is to look at the REIT ETFs that are listed on the SGX. There are three REIT ETFs listed in Singapore, and here’s how they have done in 2018:
|REIT ETFs||1-Year Returns (Including distributions)||Share price movement in YTD|
|Lion-Phillip S-REIT ETF*||-0.30%||-10.5%|
|NikkoAM-StraitsTrading Asia ex Japan REIT ETF**||0.74%||-8.6%|
|Phillip SGX APAC Dividend Leaders REIT ETF**||-0.74%||-3.2%|
* As at 30 September 2018
** As at 31 October 2018
Below, we take a look at the individual performances of the REITs after releasing their third quarter results.
39 REITs, 6 Property-Related Stapled Securities And Trusts, And 3 REIT ETFs In Singapore
It is interesting to note that there have been no new REIT listings in Singapore in the second half of 2018 so far. Following the merger of Viva Industrial Trust and ESR REIT in October, there is one less REIT listed on SGX. The new entity will continue to be known as ESR REIT.
Below is how the individual REITs listed on SGX have performed in the YTD 2018.
|No.||All REITs, Stapled Securities And Other Trusts||Industry (Country)||Price On 26 Nov 2018 (SGD)||Dividend Yield (%) +||Return In YTD 2018 (%) +|
|1||CapitaLand Commercial Trust||Commercial (Singapore)||1.72||5.1||-7.2|
|2||Cromwell European REIT (EUR)||Commercial (Denmark, France, Germany, Italy, and the Netherlands)||EUR 0.44||8.6||-4.2|
|3||Frasers Commercial Trust||Commercial (Singapore and Australia)||1.37||7.1||-1.7|
|4||IREIT Global||Commercial (Germany)||0.74||7.9++||4.2|
|5||Keppel REIT||Commercial (Singapore and Australia)||1.13||5.1||-6.0|
|6||Keppel-KBS US REIT (USD)||Commercial (USA)||USD 0.56||10.3||-29.1|
|7||Manulife REIT (USD)||Commercial (USA)||USD 0.77||7.4||-8.4|
|8||OUE Commercial REIT||Commercial (Singapore, China)||0.46||8.0||-24.3|
|9||Suntec REIT||Commercial and Retail (Singapore)||1.76||5.7||-13.7|
|10||BHG Retail REIT||Retail (China)||0.66||8.4++||-4.2|
|11||CapitaLand Mall Trust||Retail (Singapore)||2.21||5.1||8.7|
|12||CapitaRetail China Trust||Retail (China)||1.36||7.7||-12.5|
|13||Fortune REIT (HKD)||Retail and Commercial (Hong Kong)||HKD 9.00||5.9||-3.3|
|14||Frasers Centrepoint Trust||Retail (Singapore)||2.16||5.9||1.3|
|15||Lippo Malls Indonesia Trust||Retail (Indonesia)||0.20||11.4||-40.3|
|16||Mapletree Commercial Trust||Retail and Commercial (Singapore)||1.62||5.6||5.0|
|17||Mapletree North Asia Commercial Trust (Formerly known as Mapletree GCC Trust)||Retail and Commercial (China and Hong Kong)||1.10||6.8||-4.5|
|18||Sasseur REIT||Retail (China)||0.70||8.6||N.A.|
|19||SPH REIT||Retail (Singapore)||0.99||5.7||0.1|
|20||Starhill Global REIT||Retail and Commercial (Singapore, Australia, Malaysia and others)||0.67||7.2||-7.9|
|21||AIMS AMP Capital Industrial Reit||Industrial (Singapore and Australia)||1.38||7.9||2.3|
|22||Ascendas Reit||Industrial (Singapore, Australia and China)||2.55||6.3||0.3|
|23||Cache Logistics Trust||Industrial (Singapore and Australia)||0.67||9.0||-16.0|
|24||EC World REIT||Logistics (China)||0.69||8.8||-2.7|
|26||Frasers Logistics & Industrial Trust||Logistics and Industrial (Australia)||1.03||6.8||-3.3|
|27||Keppel DC REIT||Data Centres (Diversified)||1.35||5.6||-0.7|
|28||Mapletree Industrial Trust||Industrial (Singapore)||1.85||6.6||-3.8|
|29||Mapletree Logistics Trust||Logistics and Industrial (Singapore, Japan, Hong Kong and others)||1.22||6.6||-3.3|
|30||Sabana REIT||Industrial (Singapore)||0.40||7.7++||5.4|
|31||Soilbuild Business Space REIT||Industrial (Singapore)||0.59||9.0||-7.0|
|32||Ascendas Hospitality Trust||Hospitality (Australia, Japan, Singapore and China)||0.77||7.5||-2.9|
|33||Ascott Residence Trust||Hospitality (Japan, China, Singapore and others)||1.08||6.4||-7.0|
|34||CDL Hospitality Trust||Hospitality (Singapore, Australia, Maldives, New Zealand, Japan, United Kingdom)||1.47||6.2||-6.7|
|35||Far East Hospitality Trust||Hospitality and Commercial (Singapore)||0.60||6.7||-10.0|
|36||Frasers Hospitality Trust||Hospitality (Singapore, UK, Japan, Australia and Germany)||0.72||6.9||-3.3|
|37||OUE Hospitality Trust||Hospitality (Singapore)||0.67||7.5||-16.7|
|38||First REIT||Healthcare (Indonesia)||0.98||7.9||-14.0|
|39||Parkway Life REIT||Healthcare (Singapore and Japan)||2.59||4.9||-9.3|
|Other Property Trusts|
|40||Accordia Golf Trust||Golf Courses (Japan)||0.50||8.5||-26.6|
|41||Ascendas India Trust||Industrial (India)||1.04||6.7||-2.6|
|42||Dasin Retail Trust||Retail (China)||0.85||8.8||6.0|
|43||Hutchison Port Holdings Trust||Port Assets (Hong Kong and China)||0.26||8.9||-33.3|
|44||Keppel Infrastructure Trust||Infrastructure (Singapore)||0.46||8.4||-13.3|
|45||RHT Health Trust||Healthcare (India)||0.74||7.0||-6.1|
|45||Lion-Phillip S-REIT ETF||ETF||0.96||5.2||-2.9|
|46||NikkoAM-Straits Trading Asia Ex Japan REIT ETF1||ETF||1.08||N.A.||-6.9|
|47||Phillip SGX APAC Dividend Leaders REIT ETF||ETF||1.35||N.A.||-4.9|
+ Based on OCBC Investment Research Indications
++ From Bloomberg Markets
1 From Bloomberg Markets
What Happened In 2018 So Far?
As you can see, majority of the returns by REITs have been in the negative territory. While the increase in interest rate definitely has some bearings on this outcome, we cannot ignore the fact that majority of the global markets have experienced a dip in 2018.
This is why the negative returns for REITs in 2018 should not be the only factor to keep you away from investing in this asset class.
The best performing REIT in YTD 2018 is CapitaLand Mall Trust. While retail REITs have not been in favour due to burgeoning e-commerce in recent years, the ongoing US-China trade war has taken some of the shine off other REIT types such as industrial, logistics and offices.
Other REITs that posted a good return includes retail focused Dasin Retail Trust (6.0%) and Mapletree Commercial Trust (5.0%), as well as Sabana REIT (5.4%) and IREIT (4.2%).