Investing in Singapore REITs is the bread and butter for all Singapore investors. But first, a story I like to share.
In the mid of 2000, Blackstone Group, a major investment firm completed the purchase of one of the largest US office property buyouts at US$37.7 billion.
People thought they were crazy. It was then the largest property buyout at the height of a property bubble. Yet the company profited massively from the investment.
You see, timing in the market is important. But the “smart money” like Blackstone Group knows what beginner investors lack — They know how to take advantage of properties to grow their assets.
In fact, today, Blackstone has grown and managed more than US$540 billion of assets. And much of their success lies in picking good property investments.
Singapore REITs still the most stable form of “leveraged” investing for dividends
If you’re an income investor in retirement or growing your wealth for retirement, you want to think like a Blackstone.
At its heart, a REIT is an asset class full of value. And it’s a wonderful way for everyday investors to grow their wealth safely through properties.
Just like how Blackstone made money on their basket of property investments.
I’m sure you’ve heard of friends and relatives happily sitting on properties collecting income. What’s more, some of the wealthiest people in Asia have built their wealth on properties. No matter what, investing in properties is one way to get rich.
But you’ll agree with me, buying properties is a huge commitment.
And it’s not cheap if you want to be a landlord in Singapore.
The thing is, you need to find your own tenants, manage them and sometimes even have to deal with silly issues, like tenants complaining about replacing lost keys, while you’re enjoying your holidays.
That’s why, to me, REITs are a perfect way to get you started to grow your passive income.
Singapore REITs might sound complex, but it’s not
REITs make money exactly like how a bank does.
REITs borrow money, then use it to buy properties that pay them a higher interest rate, or property yield.
And they can keep buying as many properties as they like, just by borrowing over and over again.
I call REITs a “virtual bank”.
The key difference between a bank and REIT is that banks take in “short-term” deposits and lend out to companies and people at a higher yield.
While REITs borrow “short-term” money and invest in properties at a higher rental yield.
For instance, CapitaLand Integrated Commercial Trust (formerly CapitaLand Mall Trust) borrows money from banks to buy and own several iconic shopping malls like Raffles City Shopping Centre, Junction 8, Funan Mall and many others.
So, if you buy CapitaLand Integrated Commercial Trust today, you’d get to own all these retail properties and collect their rental through dividends at a very low cost.
But more importantly, CapitaLand Integrated Commercial Trust professionally takes care of all the properties for you — from finding new tenants, to collecting rent from tenants and property maintenance.
This saves you the pain of actually running the properties yourselves.
That’s why, to me, REITs are a perfect way to get you started to grow your passive income.
And that’s why I compiled the 10 best Singapore REITs for you to buy today in 2021.
Note: This is an update from my extremely popular article – Your Retirement Guide: 8 Best Singapore REITs to Buy Now 2020.
Singapore REIT #1: Buying Singapore’s Biggest Industrial REIT
Ascendas Real Estate Investment Trust (SGX:A17U) needs no introduction.
It has a market cap of S$12.4 billion.
This REIT is one of Singapore’s top 30 companies that is also part of the Straits Times Index (STI)
The Straits Times Index (STI) lists out the top 30 Singapore companies based on how valuable they are.
This is traditionally Singapore’s largest industrial REIT, owning logistics, warehouse facilities and light-industrial buildings that serve to electronics, food, machinery tenants. But these days, Ascendas REIT have evolved into something else. You see, it’s moving not only into the business & science parks, which has done for them very well. But they also are moving into data centres.
It recently announced that it bought 11 data centres worth S$960 million, all of it in Europe.
Ascendas REIT knows where to smell the latest trends
Data centres are a huge asset to today’s digital age.
More companies are moving into cloud computing. More people are using smartphone devices. Even homes are getting into the internet of things.
The 5G revolution, and all of that above requires a place for data.
Data centres act like a home for the internet.
When you want to stream a video, post pictures online, or even upload your office documents, you need a physical space to store all these virtual data. That’s why Ascendas REIT wants to get into this game. And fast.
By moving into the business, science parks and data centres, Ascendas REIT captures the high-quality tenants of today — not just government agencies like DSO National Laboratories, the big Singapore banks, or telecommunication companies, but fast-growing technology companies that are generating immense amounts of cash flow.
In other words, Ascendas REIT wants companies — at the forefront of technology, biomedical science, banking and telecommunications – as their paying tenants.
Diversification makes investing in Ascendas REIT safe
And what’s even better, is Ascendas REIT makes sure that not one of its tenants take up more than 5% of Ascendas REIT’s gross rental income.
I believe this is important here.
Because no matter how big these tenants are in their fields, Ascendas does not need to rely on any of them to grow the business. You see, if anyone decides to leave the properties, Ascendas can easily find another tenant without worrying about a drop in rental income.
During the Covid-19 pandemic last year, even though 9 out of its more than 1,400 tenants pre-cancelled their leases, it didn’t affect Ascendas REIT one bit.
In its latest second half of 2020, Ascendas REIT gross rental income grew 12.5% to hit S$528 million. Its total distribution to shareholders grew 9.8% to S$275 million over the same period.
If you’d held Ascendas REIT since its IPO in 2002, you’d have made more than 500% on your capital, including dividends.
That’s a solid 11% returns per year.
Today, its dividend yield is 4.67%.
If you’re a long time REIT investor, and you’d like to get into the wave of the internet revolution before the whole thing explodes, Ascendas REIT, in my opinion, is one great way to invest in the next internet revolution through a Singapore REIT.
Ascendas REIT is in my best 10 Singapore REITs
Source: Company Annual Reports
Singapore REIT #2: Getting into CapitaLand’s Most Overlooked Brand
Ascott Residence Trust, or Ascott REIT (SGX:HMN) is one of the truly great businesses of CapitaLand.
And the man behind Ascott is a visionary.
The late Mr. Ameerali Jumabhoy was always willing to challenge conventions.
Without him, CapitaLand wouldn’t have built one of the best trophy assets of today — The Ascott brand.
I’d say Ascott is one of Singapore’s iconic, yet overlooked property brands.
Mr. Jumabhoy founded Scotts Holdings (a property company) in 1982. And used it to open The Ascott Singapore (or Ascott) two years later — the first world-class serviced residence in Asia Pacific at that time.
Ascott got its name from its Scotts Road location.
And it was inspired by the famous British races at Ascot — an extra “t” was added to prevent copyright issues.
Mr. Jumabhoy had a love for these equestrian sports.
At its peak, Scotts Holdings had more than S$600 million worth of assets.
Scotts Holdings later on merged with Stamford Group, owned by DBS Land at that time, to form The Ascott Limited.
Then, Ascott was bought by CapitaLand Ltd. (a merger between DBS Land and Pidemco Land).
Ascott REIT is the cash cow of The Ascott
Ascott REIT is the biggest hospitality trust in the Asia Pacific region. And the eight largest hospitality REIT worldwide.
After a merger with Ascendas Hospitality Trust, Ascott REIT has a market cap of S$3.3 billion.
Today, Ascott REIT has more than S$7 billion worth of property assets across the world.
This Singapore REIT runs more than 86 properties in 38 different cities and has over 16,000 residence units.
Casual travelers like you and I might rely on online travel websites — Agoda, TripAdvisor and Expedia — to plan our holiday stay.
But for many business travellers, they turn to the more luxurious, medium to longer stay places.
And Ascott REIT caters to these group of people with its rich portfolio of global brands — Ascott, Citadines, Somerset Serviced Residence, Sheraton, Pullman, Doubletree by Hilton, Courtyard by Marriott, The Credit Collection, ibis and lyf by Ascott.
Now, what I like about Ascott REIT is this.
Most of its properties are freehold leases. This means Ascott REIT virtually owns its properties forever. This is unlike many of our Singapore properties where a property sits on a land lease of up to 99 years. Industrial properties? Up to 60 years only.
You see, when leases expire, Singapore REITs have to raise money to renew their 99-year or 60-year leases.
But not Ascott REIT.
And I find freehold lease a valuable asset. This also means that Ascott REIT’s properties will get more valuable over time.
Since investors know, they don’t have to put in money to renew those leases.
But Ascott REIT is more than just freehold leases
Half of its gross revenues come from “long-term” fixed management contracts.
These contracts are always paid to Ascott REIT, whether there’s a pandemic crisis or not.
That keeps Ascott REIT going.
The other half is what I call a variable fee structure. This means, Ascott collects a small, fixed fee from its hotel tenants. So, as the hotel makes more money, Ascott REIT collects a larger percentage of that profits.
Ascott is not profiting now because its hotels are shut down across the world.
But, in my opinion, its full potential gains will immediately see a strong rebound once the COVID pandemic ends.
What’s even better is Ascott REIT’s share price works like a bond — largely stable.
Even after the Covid-19 pandemic, its shares quickly recovered to its average S$1.00 per share. Today, its dividend yield is 2.89%.
But historically, Ascott REIT has paid close to 8 cents per unit in distribution. I think its “normal” dividend yield is much higher at 7%, once this whole pandemic is over.
Because the market know it always pays out close to 100% of its distribution as dividends.
This creates share price stability.
That’s why I find this a strong dividend payer.
Ascott REIT’s best gains have yet to come
And what’s more, Ascott REIT has a strong balance sheet. That allows them to borrow more money to grow their property portfolio.
And also allows them to comfortably refinance any debt that is maturing.
I don’t think Ascott REIT will hit any financing issues at all.
Ascott REIT has the largest exposure of its properties to countries with a low rate of infection — Singapore, Australia, Vietnam and China. And these properties already take up 41% of its total property assets.
Now, with vaccines underway and governments signalling herd immunity? I feel Ascott REIT is ready to profit greatly from this return to normal.
I quickly cannot imagine companies will stop being global. I cannot quickly imagine companies will stop sending their staff across the world for business.
I think world will get more inter-connected not only online, but physically too.
And travellers, whether for work or leisure, will still need a comfortable, affordable place to stay in.
Ascott REIT should continue to benefit. If you’re looking to grow your REIT portfolio for dividends, I think this is one Singapore REIT worth buying.
Ascott REIT is in my best 10 Singapore REITs for 2021.
Source: Company Annual Reports
Singapore REIT #3: The One Singapore REIT You Must Own
CapitaLand Integrated Commercial Trust (SGX:C38U), or CICT is now the third largest REIT in Asia.
It’s also the biggest Singapore REIT.
This REIT is a S$14.3 billion “retail-office integrated” REIT, behind Hong Kong’s Link REIT and Australia’s Scentre Group.
This public-listed Singapore REIT grew from three properties — Tampines Mall, Junction 8 and Funan DigitaLife Mall, when it first IPO in 2002 to 24 properties, including five integrated developments.
The thing is, more and more REITs are going into mix-developments like CICT — combining both retail and office spaces into one area.
I think it makes a lot of sense here, not just because of the limited land space in Singapore, but many properties have to become more efficient to provide people with a convenient “work-life” environment.
This is Singapore’s Best REIT hidden value
But CICT is more than that.
More REITs are following CICT footsteps. But what truly sets CICT apart from the rest is it can take an older building and turn it into something innovative and trendy.
This is also what property ‘gurus’ like to call asset enhancement initiatives, or AEI.
For instance, CICT took one of its quiet, consumer-electronics focused retail malls, and transformed it into one of the busiest social retail malls at downtown City Hall.
This mall is called Funan Mall. Completed in 2019, it now holds more than 200 brands, with at least 30% of its stores in flagship-concept stores.
According to CICT’s financial reports in 2019, monthly shopper traffic rose more than 70% compared to the last generation, Funan DigitaLife Mall.
And even though CICT had not expanded Funan Mall’s net leasable area (NLA), the property valuation has more than doubled from its AEI.
Now, NLA is the floor space in a building that can be rented to tenants.
If you ask me, this is the hidden value CICT provides for its retail malls. In fact, Funan Mall’s occupancy rate improved from 95% to 99%.
And here’s what most people overlook.
Walk down two streets from Funan Mall to Capitol Singapore, another integrated development with a struggling retail business.
CICT isn’t the only property that underwent AEI. It also transformed other iconic retail malls, including Bugis+ and JCube.
CICT has rewarded shareholders with abundance. It grew its dividends from 3.38 cents per share to 11.97 cents per share in 2019. Because of the COVID pandemic, CICT had to slash half of its dividends paid out by 6.95 cents per share. Its current dividend yield is 3.2%
I’m not concerned about this.
Because, in the long run, I believe CICT dividends can rebound and grow even higher year after year. I expect its normal dividend yield to be around 5.5%.
Not because it’s Singapore’s largest REIT, but because of their ability to transform retail and office properties.
CapitaLand Integrated Commercial Trust is in my best 10 Singapore REITs for 2021.
Source: Company Annual Reports
Singapore REIT #4: The Heartland Mall Dominator You Need to Know
Frasers Centrepoint Trust (SGX:J69U) is a major Singapore retail REIT.
What I like about this REIT is all of its 11 retail malls are found in the suburbs of Singapore — where it captures a large number of the local residential population.
When the Singapore government announced Phase 2 of Circuit Breaker, many shoppers in fact, returned to these heartland malls.
The reason is because these malls are close to homes and MRT stations.
You’d want to quickly grab a meal. You’d want to buy any “last-minute” daily essentials. Or you’d simply want to bring your family out for shopping. These heartland malls are the most convenient, and ideal places to visit.
Like what analysts always say, Frasers Centrepoint Trust’s malls are “last-mile” fulfilment hubs.
Now, Frasers Centrepoint Malls captures more than 50% of Singapore’s population — assuming each of their malls serve a vicinity of a 3km radius.
Frasers Centrepoint Trust by the numbers
In its latest second half financial results ending Sep 2020, Frasers Centrepoint Trust’s gross revenue fell 33.8% to S$64.4 million, while its total distribution fell 49% to S$77.6 million.
But this weak results are temporary.
Management continues to reaffirm that its retail malls’ occupancy rate is around 95%.
And its total tenants’ sales have recovered close to pre-COVID levels. In fact, its malls’ shopper traffic has stabilized to around 60% to 70% of pre-COVID levels.
You see, its recent purchase of the remaining 63.1% of AsiaRetail
Fund is the right move for this heartland dominator.
Frasers Centrepoint Trust is eventually going to capture the returning wave of shoppers.
AsiaRetail Fund owns five Singapore heartland malls — Tiong Bahru Plaza, White Sands, Hougang Mall, Century Square and Tampines 1. All located near the MRT station and command high foot traffic.
And these malls are in areas where there are limited or no big competing shopping malls around. This means, in the long run, Frasers Centrepoint gets to enjoy heartland dominance.
Today, this is current dividend yield is 3.6%, based on its 2020 dividend pay-out of 9 cents per unit. If I assume its dividends revert to around 12 cents per unit, based on 2019, then its “normal” dividend yield today should be 4.8%.
Frasers Centrepoint Trust is in my best 10 Singapore REITs for 2021.
Source: Company Annual Reports
Singapore REIT #5: Buy This Trophy Asset Before This REIT Roars Again
If you like shopping at [email protected] (also one my favourite shopping malls), you might know it’s owned by Lendlease REIT (SGX:JYEU).
You see, Lendlease REIT’s shares got crushed last year, because of the COVID pandemic. It was those rare times when you saw Orchard Road turned into a ghost town.
Shops were shut. People were stuck at home.
And the worst part? Lendlease REIT shares fell a whopping 50% in March 2020.
Lendlease REIT is also one of the newer Singapore REITs — recently listed in 2019. And It currently spots a market cap of S$950 million.
Now, Lendlease REIT is unlike the giant Singapore REITs we commonly known. The fact is, Lendlease REIT owns only two properties — the iconic [email protected] and Sky Complex, a grade-A office in Milan, Italy. Sky Complex is fully leased to Sky Italia, owned by Comcast Corporation.
But let’s talk about [email protected], since this shopping mall dominates 66% of Lendlease REIT’s gross rental income
What’s so special about Lendlease REIT’s trophy asset?
It doesn’t bring in the “high-end” luxury brands like Dior, Louis Vuitton or Chanel.
So, in a way, [email protected] is different from the “classier”, more mature Ngee Ann City (owned by Starhill Global) and Paragon Shopping Mall (owned by SPH REIT).
Instead, you get Zara, Food Republic and Cotton On in [email protected] Even the new food tenants it recently brought in — The Coffee Academics, Paris Baguette, Josh’s Grill, in my opinion, appeal to a trendy crowd.
Not only that, [email protected] is largely diversified with 150 tenants. The mall is 99.7% occupied. Even during the Covid-19 pandemic.
And from their financial reports, I know not a single one of these tenants take up more than 4% of the REIT’s total gross income.
It’s important this way – to diversify. You see, when a few tenants decide to withdraw, Lendlease REIT can simply replace them without losing a huge income.
That’s why I actually find Starhill Global’s Ngee Ann City risky (but that’s a story for another day).
In the markets, as an everyday investor, it’s far too risky to bet all my money on a single horse. And readers who have followed me know I’ve never liked concentration.
It’s also one of the few things I disagree with Warren Buffett’s “Keep all your eggs in one basket, but watch that basket closely” quote.
Lendlease REIT by the numbers
In its latest 1HFY2021 financial results, Lendlease REIT’s gross revenues and distribution per unit (DPU) both maintained at S$41.6 million (+3.2% y/y) and 2.34 cents per share (+0.8% y/y) respectively.
Tenant sales and foot traffic continued to improve. In fact, under Phase Three of Singapore’s reopening plan, Lendlease REIT’s tenant sales and foot traffic have already returned to 73% and 61% of its pre-Covid-19 levels respectively.
What’s more is 40% of its leases were “enhanced” with new, experiential retail and food concepts.
That’s why I’m confident [email protected]’s foot traffic is going to return to pre-Covid-19 levels soon.
Now, what I don’t like about Lendlease REIT is the fact it has only two properties, which I’ve mentioned earlier — makes it a small REIT.
Smaller REIT shares fall the hardest when a crisis comes.
But the thing is, I still find Lendlease REIT’s crown jewel, [email protected] a top-notch shopping mall.
Despite the narrative about e-commerce disruption, [email protected] is probably one of the few malls which will stand against the online disruption.
And so far, Lendlease’s shares have soared as Singapore’s community cases drop.
In fact, its shares rebounded strongly (+66% gains) to S$0.82 just earlier in January this year, right after it crashed last year. And Lendlease REIT shares are already sitting close to its pre-Covid-19 levels.
Lendlease REIT gains aren’t over
In my opinion, the gains aren’t done yet.
Lendlease REIT also has other smaller investments. This includes a recent stake in JEM shopping mall and it was awarded a tender to redevelop the 48,200 sqft car park at Grange Road last year.
The former car park will set to operate in 2022, which will be a dedicated event space including indoor live performance, cinema and hawker stalls. All complementing [email protected]’s youthful audience.
And I’m sure both investments will help diversify Lendlease REIT’s portfolio mix and grow its DPU over the long term.
Right now, its dividend yield is around 5.1%, which I feel is a good yield range for my portfolios. And for me, as a long-term dividend investor, I’d say Lendlease REIT is one of the few smaller Singapore REITs worth looking at.
Lendlease REIT is in my best 10 Singapore REITs for 2021.
Singapore REIT #6: Collect 5% Dividend Yield, Even If This Stock Goes Nowhere
Keppel REIT (SGX:K71U) needs no introduction.
This Singapore REIT is one of the biggest office
landlords with a market cap of S$4.4 billion.
It owns and manages 11 office buildings across Singapore, Australia and Korea.
If you ask me, what I like about Keppel REIT is all of its properties are in the prime grade-A office location, or largely CBD area.
In Singapore, it owns some of CBD’s most iconic buildings including a 79.9%-stake in Ocean Financial Centre, 33.3%-stake in Marina Bay Financial Centre, 33.3%-stake in One Raffles Quay and Keppel Bay Tower.
In Australia, it owns a 50% stake in five properties across Sydney, Melbourne, Brisbane and Perth. In South Korea, it owns around 99.4% of T Tower in Seoul.
Keppel REIT also recently bought Keppel Bay Tower near Harbourfront.
These high-grade office buildings have the power to attract big MNCs, whether there’s a crisis or not – including technology and financial services companies. In fact, during the last quarter of 2020, more than half of Keppel REIT’s non-renewed spaces have since been renewed.
So far, Keppel REIT’s overall occupancy rate is around 98%, which reflects MNC demand for prestigious CBD locations.
In my opinion, this Singapore REIT is one of the more resilient office landlords.
And I don’t think a lot of people will permanently shift their workspace into their homes, especially in Singapore where the average home space is less than a 1,000sqft.
Imagine the frequent couple arguments, carrying the baby while on zoom meetings, the kids screaming during school holidays.
Keppel REIT shares are “like a bond”
Over the past five years, Keppel REIT’s shares have ranged between S$0.95 to S$1.29.
Even during the Covid-19 pandemic last year, the lowest it went was S$0.95 before recovering to S$1.15.
Keppel REIT’s shares doesn’t bounce up and down often.
This is because its high-grade office properties tend to be defensive in nature. Big, well-established companies still need to run their operations in a physical workspace.
In its latest financial results ending Dec 2020, Keppel REIT’s property income (revenue) grew 3.8% to S$170 million. This came from new contributions from T Tower and Victoria Police Centre, during the Covid-19 pandemic outbreak.
Well, for me, I see Keppel REIT shares like a bond, giving out steady dividends, but little in capital gains. Its dividend yield now 4.7%.
Keppel REIT is in my best 10 Singapore REITs for 2021.
Source: Company Annual Reports
Singapore REIT #7: Unlock the Entire 5G Revolution in Keppel DC REIT
Keppel DC REIT (SGX:AJBU) is a specialized SGD4.8 billion real estate investment trust.
Unlike the other Singapore REITs, Keppel DC is the only “pure-play” data centre REIT to be listed since 2014.
Today, Keppel DC has 18 data centres, mostly in Asia. 6 of its data centres are in Singapore.
Now, data centres are huge, dedicated spaces for high-powered computers. These systems run massive amounts of data every second — from streaming online videos to surfing your social media.
And digital content is growing.
That’s why most of its tenants are internet companies, telecom operators and IT services.
Because there’s so much demand for data traffic now, tenants need to make sure these spaces have specialized, reliable equipment like cooling systems and infrastructure to make sure nothing goes wrong.
You see, Keppel DC knows it’s going to benefit from the huge growth in the new digital economy. People are going into cloud adoption, artificial intelligence, 5G advances, and the “Internet of Things”.
In fact, in my opinion, all of these are expected to grow at least double-digits over the next 10 years.
According to management, data centre spending in Asia Pacific is expected to exceed US$30 billion by 2023. That’s going to account more than 30% of the global market.
Keppel DC growing at breakneck speed
So far, the digital tailwind has rewarded the REIT very well.
In its latest financial results Dec 2020, Keppel DC REIT’s gross rental income jumped 12.6% to hit S$94.7 million. In that same period, its distributable income grew 12.6% to hit close to S$100 million.
Its distribution per unit (DPU) inched up 4.6% to 2.93 cents per unit, rewarding unitholders with a stable and consistent dividend growth.
Since its IPO, Keppel DC more than tripled its free cash flow from SGD34 million to SGD113 million just last year. This allowed it to reward growing dividends to its unitholders year after year.
Now, 70% of Keppel DC’s gross rental income has a shorter, 3 years lease. This gives Keppel DC more room to adjust for higher rents to capture the growing demands for data centres.
Even with its huge growth, Keppel DC maintains a healthy financial position. And banks know of its very high-quality assets — and are willing to lend them at a very low borrowing cost 1.6% per year.
This is what makes Keppel DC maintain a very high interest coverage ratio of 13x.
Since its gearing ratio is only at 35%, it has much room to grow its acquisitions.
In fact, it recently completed its acquisition at Keppel DC Dublin 1 and Kelsterbach Data Centre in Germany in March and May 2020 last year.
Both properties command a high occupancy rate of 81% and 100% respectively.
One key risk for Keppel DC is the growing competition with other data centre providers globally. Management has been careful with acquisitions.
If you see, Keppel DC’s properties are all fully occupied, or undergoing some form of renovation to improve its occupancy rate. Only its Basis Bay Data Centre has a low occupancy rate of 63%. But, so far that’s a tiny contribution to its overall rental income.
Today its current dividend yield is 3.4%.
Keppel DC REIT is in my best 10 Singapore REITs for 2021.
Source: Company Annual Reports
Singapore REIT #8: How to Own the World’s Data of Tomorrow
Mapletree Industrial Trust (SGX:ME8U) is getting into the unstoppable wave of the 5G revolution.
Now, 5G or the fifth-generation wireless technology is often portrayed as the road to the “internet of things”, self-driving cars, cloud computing and smartphone devices.
All of these require more data than ever before to run these technologies. And what’s more is you need to store these massive data in a specialized, physical space so that people all over the world can easily access it.
These spaces are called data centres.
Owning the world’s data of tomorrow
Today, Mapletree Industrial Trust has 40% of its S$6.6 billion properties in data centres.
Mapletree Industrial Trust is buying more and more data centres. In fact, it recently paid S$286 million for another data centre in Virginia, the US, on top of its 27 data centres in North America.
And as it diversifies into data centres, the stock market bids Mapletree Industrial Trust shares higher. In fact,Mapletree Industrial Trust is one of the few Singapore REITs that have its shares soaring through the Covid-19 pandemic crisis.
Having said that, Mapletree Industrial is still a major industrial REIT. It owns 87 Singapore properties and over 20 US properties.
In its latest third quarter financial results, its gross revenues grew a massive 19.7% year on year to S$123 million, while its distributable income grew 11% to S$81 million. This was due to income from its 14 data centres in the US.
Mapletree Industrial Trust knows the growth potential of data centres.
The fact that it’s redeveloping some of its older industrial buildings tells us it’s moving away from traditional industrial properties.
For example, its Kolam Ayer 2 cluster along Kallang Way will be refitted into a high-tech industry with a renovation cost of S$263 million.
These are strategically located in established industrial estates and business parks, which are served by good transportation networks.
Since its listing, Mapletree Industrial Trust has rewarded shareholders well. It grew its distribution per unit (DPU) from 8.41 cents per share in 2012 to 12.24 cents per share in 2020.
Even during the pandemic last year, it maintained its dividend growth. To me, that’s a feat. And that’s something I look out for as a long-term income investor.
Today, its current dividend yield is 4.34%.
Mapletree Industrial Trust is in my best 10 Singapore REITs for 2021.
Source: Company Annual Reports
Singapore REIT #9: How to Buy Mapletree Logistics Trust
No technology revolution is complete without the growth of e-commerce.
When you shop online, delivery takes a few days, or weeks for your stuff to arrive.
Big online retailers like Shopee, Lazada, Q10 or even Watsons actually need to store their products in huge storage spaces before the items get dispatched to you. Especially when your items come from overseas.
We know e-commerce has yet to truly hit its full potential.
And this is a tailwind for this company.
Mapletree Logistics Trust’s (SGX:M44U) goal aims to be one of the biggest Singapore REITs to own and manage warehouses and logistics stores across China, Hong Kong and Singapore.
Established in 2004, and subsequently listed on the Singapore Exchange in 2005, Mapletree Logistics Trust started out with 18 properties, and have since grown to 156 properties across Asia-Pacific, including Australia. These are high-quality logistics properties used for distribution, warehousing and other logistics services.
Mapletree Logistics Trust’s growing footprint of logistics properties is backstopped with the massive growth in the e-commerce industry.
You see, Mapletree Logistics Trust is responsible for making sure the stuff you buy online gets safely delivered — daily-needs like packet food, drinks, detergents, toothbrush, electronic devices before it gets sent to your house.
And because these are the items that get shipped, transported and delivered from all over the world, it needs to be stored in a common location before it gets delivered out.
You can tell how the e-commerce wave has benefited the huge run for Mapletree Logistics Trust.
In its latest third quarter results Dec 2020, it collected S$140 million of gross revenues. This is 15% higher compared to last year. And it grew its distributable amount by 9.7% to S$88 million.
Mapletree Logistics Trust has been growing its rental income from existing properties, bought new properties and redeveloped its older buildings.
Over the past nine months, its distribution per unit (DPU) remained steady at 6.2 cents per share. While Mapletree Logistics Trust continued to grow their property portfolio, they maintain a very healthy balance sheet.
A quick way is to use the gearing ratio, which stands at a healthy 36.8%. This is lower than 39.5% from a quarter earlier.
As a result, Mapletree Logistics Trust shares have soared as e-commerce takes shape over the past few years.
The stock is up 102% over the past five years, and this is not including dividends paid.
Considering Mapletree Logistics Trust business is tied closely to the rising e-commerce industry, strong rental growth should continue.
And with Mapletree Logistics Trust balancing between new acquisitions and managing a strong financial position, this could serve a further tailwind for Mapletree Logistics shares.
Today, its current dividend yield is 4.2%.
Mapletree Logistics Trust is in my best 10 Singapore REITs for 2021.
Source: Company Annual Reports
Singapore REIT #10: The Healthcare REIT That Never Dies
Developed countries often face one big, common problem.
An ageing population.
You see, Japan has the highest old-age dependency ratio of all OECD countries. 1 in 3 Japanese will be over 65 years old by 2050. Which means, the country has more old people than young ones who can reasonably support the country in the future.
And the government is worried.
Healthcare costs are going up and it’s critical to provide a good place to take care of the elderly.
And that’s why Parkway Life REIT (SGX:C2PU) or PLife is the REIT to position itself in this market. You see, its diversified portfolio of 53 properties owns some of the best nursing homes in Japan.
Though it’s a much smaller REIT than the other Singapore REITs, it is, in my opinion, the best of the best healthcare REIT.
Healthcare Spending Never Dies
PLife owns 49 properties across Japan, which are well-located in the dense, residential districts of big cities.
All of its properties are fully leased to various nursing home operators, with the big operators contributing more than 50% of its Japan nursing home rental income.
These are long term leases expiring in 11 years. And most of its properties have a yearly rent review.
In Singapore, PLife also owns some world-class local private hospitals — Mount Elizabeth Hospital, Gleneagles Hospital and Parkway East Hospital.
Pandemic or not, even in Singapore, the demand for healthcare is getting important. Very rich people would pay to fly here to Singapore to have their health treated in one of these hospitals.
Now, these hospitals are master leased to IHH Group, Asia’s largest private healthcare group listed in both Malaysia and Singapore.
And they’re very profitable in South East Asia, having been owned by Japan’s 2nd largest trading company, Mitsui & Co, and the Government of Malaysia.
Gross rental income is split equally between its Singapore and Japan assets.
You’d say both Singapore and Japan are the twin income engines for the REIT. Its latest annual results have been resilient — gross revenue grew 4.9% to S$120 million.
While its distributable income grew 4.5% to S$83.4 million. Distribution per unit (DPU) grew 4.5% to 13.8 cents per share.
PLife’s properties provide a very predictable form of cash flow. Free cash flow has been stable, growing from SGD65 million in 2010 to SGD80 million in 2019.
Since its IPO in 2007, it grew its distribution per unit (DPU) from 6.32 cents to 13.8 cents in 2020.
This gives income investors a very stable form of dividend income.
And if you’d held PLife since its IPO, you’d made an annual total return of close to 11%, including dividends. Making it one of the best performing Singapore REITs (as at Dec 2020).
Balance sheet is strong. Its gearing is at a healthy 38.5%, while its interest coverage ratio is 18x. This is because its Japanese properties can borrow at very cheap cost, in Japanese Yen.
While its key growth markets are in Singapore and Japan, PLife is also looking beyond other developed markets including Australia, Europe and the United Kingdom.
Today, its current dividend yield is 3.3%.
ParkwayLife REIT is in my best 10 Singapore REITs for 2021.
Source: Company Annual Reports
Final Thoughts — Why Singapore REITs are the Ultimate “Wealth Defence”
If you’re like a lot of people, you’re worried about whether you’ve enough for retirement… And worried about inflation eating into your savings.
Inflation is one of the biggest dangers a person saving for retirement faces. It can crush your buying power of money you’ve saved up all over the years.
Perhaps you might be also worried about another major crisis – like the one we saw last year during the COVID pandemic and the distant global financial crisis in 2008 – that will wreck your wealth.
If you’re one of these people, then in my opinion, it’s a “no-brainer decision” for you to own some of the best dividend-paying Singapore REITs.
Owning good, Singapore REITs is a good inflation defence since property prices and rental income grows along with the economy. As the economy prospers, inflation rises. Landlords can raise prices along with inflation. And the value of your income stream remains intact.
Also, REITs are safer, better places to park long-term wealth than fixed deposits or gold. For one, you not only get to own some of the best properties in Singapore, and across the world.
You’re owning a piece of real estate.
Further, you can start out as little as $100. And keeping solid REITs allow you to grow your wealth this way.
So if you commit to a lifetime of accumulating high-quality, reliable Singapore REITs bought at reasonable prices, you’re almost guaranteed to grow huge wealth in the long run.
This is one of the best ways to invest for retirement.
And it’s the next closest thing to get passive income.
Sometimes, investing can be simple.
Always here for you,
Willie Keng, CFA
Founder, Dividend Titan
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