Business & Economy Property S-REIT looks attractive to investors in a climate of fear and uncertainty

S-REIT looks attractive to investors in a climate of fear and uncertainty

- Advertisement -

A recent report by Nikkei Asian Review said that Singapore-listed real estate investment trusts (S-REIT) are emerging as safe havens for equity investors due to their low debt levels and steady cash flow. The report said that he Singapore REIT sector is viewed favourably by such investors especially as market uncertainties increases as it allows them to maintain their relatively high dividends.

A real estate investment trust (REIT) is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and timberlands. Some REITs engage in financing real estate.

Singapore is the second best prospect in the Asia Pacific for real estate investments

REITs can be publicly traded on major exchanges, public but non-listed, or private. The two main types of REITs are equity REITs and mortgage REITs (mREITs). In November 2014, equity REITs were recognized as a distinct asset class in the Global Industry Classification Standard by S&P Dow Jones Indices and MSCI. The key statistics to examine the financial position and operation of a REIT are net asset value (NAV), funds from operations (FFO), and adjusted funds from operations (AFFO).

- Advertisement 1-

There are 31 REITs listed on the Singapore Exchange, with the latest REIT, Cromwell European REIT, listed on 30 November 2017. The first one to be set up being CapitaMall Trust in July 2002.

They represent a range of property sectors including retail, office, industrial, hospitality and residential. S-REITs hold a variety of properties in countries including Japan, China, Indonesia and Hong Kong, in addition to local properties. In recent years, foreign assets listing on the Singapore Exchange has grown to overtake those traditional listing with local assets.

S-REIT are regulated as Collective Investment Schemes under the Monetary Authority of Singapore’s Code on Collective Investment Schemes, or alternatively as Business Trusts.

Some of the regulations that S-REITs have to adhere to includes:

  • Maximum gearing ratio of 35%
  • Annual valuation of its properties
  • Restriction to certain types of investments the S-REITs can make
  • Distribution of at least 90% of its taxable income

S-REITs benefit from tax advantaged status where the tax is payable only at the investor level and not at the REITs level. In addition to REITs, there are ten Business Trusts (“BTs”) (similar to REITs but may hold assets that are not conventional and are not subjected to stringent rules as compared to SREITs), and six Stapled Instruments (composed of a stapled Business Trust Unit and a REIT unit), which are listed on the Singapore Exchange. The total market capitalisation of the listed Trust on Singapore Exchange approximate SGD 100 billion (as at 30 Nov 17).

The majority of the returns by S-REITs have been in the negative territory in 2018. Market observers say the increase in interest rate has some bearings on this outcome, but considering the fact that majority of the global markets have experienced a dip in 2018, this should not be the only factor to keep savvy investors away from investing in this asset class.

S-REIT
image credit: Wikimedia Commons

The online publication Dollars and Sense said in their recent report card on S-REIT that the best performing S-REIT in YTD 2018 is CapitaLand Mall Trust.

- Advertisement 2-

It said: “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%).”

Investment property – Is it the best way to beat inflation?

According to research from the Singapore Exchange, there was a net inflow of S$28.1 million from institutional investors into the S-REIT sector in November, reversing three consecutive months of net outflows.

River Valley Asset Management said on a note on Wednesday in a climate of fear and uncertainty there were still attractive opportunities for S-REIT investors but that they should go back to their core investment philosophy and look for businesses with predictable cashflows,

“As we close an eventful 2018, fear and uncertainty seem to rule markets, leaving attractive opportunities for investors in their wake. In an environment like this we go back to our core Investment philosophy and look for businesses with predictable cashflows that are trading at an attractive price. In our search we occasionally find a company that is trading attractively mainly because most investors have not heard of it. Cromwell European REIT (CERT), listed in Singapore just about a year back, is one such name.

CERT is the first diversified pan-European real estate trust in Singapore and has a mandate to invest in income-generating office, light industrial/ logistics and retail properties in Europe. CERT has a portfolio of properties in countries including Denmark, France, Germany, the Netherlands, Italy and others. In this month’s newsletter, we present our detailed analysis of the company and explain how this stock clearly fits our investment philosophy and why we think it is a stock just waiting to be discovered by the yield-chasing Singapore market.”

How to Secure an Investment Loan Quickly

Are you planning to invest in S-REIT but are ensure of funds availability? Don’t worry because iCompareLoan mortgage broker can set you up on a path that can get you a home loan in a quick and seamless manner. We are the experts who do the work for you for free, while you lean back, rest and rely on our professionalism at absolutely no cost to you.

- Advertisement 3-

Our brokers have close links with the best lenders in town and can help you compare Singapore home loans and settle for a package that best suits your home purchase needs. Find out money saving tips here.

Whether you are looking for a new home loan or to refinance, the Mortgage broker can help you get everything right from calculating mortgage repayment, comparing interest rates all through to securing the best home loans in Singapore. And the good thing is that all our services are free of charge. So it’s all worth it to secure a loan through us.

For advice on a new home loan.

For refinancing advice.Follow us on Social Media

Send in your scoops to news@theindependent.sg 

- Advertisement -

Read More

Lim Tean: Why Josephine Teo so quiet on OCBC phishing scam?

Singapore — In a Facebook post that resonated with many netizens, lawyer, and opposition leader Lim Tean asked why Ms Josephine Teo has seemingly kept mum on the recent OCBC phishing scam? Last month, almost 470 OCBC customers were victims...

Quick-thinking grandma, 73, outfoxes scammers, helps police nab them

Singapore — A 73-year-old woman pulled a fast one on scammers who told her a tall tale about her grandson, which ended up with...

Another family loses life savings, this time to DBS’ S’pore Bicentennial Commemorative S$20 note phishing scam

Singapore — A concerned individual appealed for assistance online after her mum fell victim to a "DBS Bicentennial Commemorative Note" phishing scam, resulting in...

‘Crazy auntie finally gets caught’ — Netizens react to the arrest of Iris Koh

Singapore — Many netizens voiced out their relief in reaction to the news that Ms Iris Koh, the leader and founder of Healing the...

Single on CNY? Rent BF for just S$50 a day; services include angbao collection & playing mahjong with relatives

Singapore — Those needing company during the Chinese New Year celebrations or tired of relatives asking why you still don’t have a boyfriend can...

Lim Tean: Why Josephine Teo so quiet on OCBC phishing scam?

Singapore — In a Facebook post that resonated with many netizens, lawyer, and opposition leader Lim Tean asked why...

Quick-thinking grandma, 73, outfoxes scammers, helps police nab them

Singapore — A 73-year-old woman pulled a fast one on scammers who told her a tall tale about her...

Another family loses life savings, this time to DBS’ S’pore Bicentennial Commemorative S$20 note phishing scam

Singapore — A concerned individual appealed for assistance online after her mum fell victim to a "DBS Bicentennial Commemorative...

‘Crazy auntie finally gets caught’ — Netizens react to the arrest of Iris Koh

Singapore — Many netizens voiced out their relief in reaction to the news that Ms Iris Koh, the leader...
Follow us on Social Media

Send in your scoops to news@theindependent.sg