Note: This is an update from my popular article 10 Best Singapore REITs to Buy Now Guide for 2021 (previously was Your Retirement Guide: 8 Best Singapore REITs to Buy Now 2020).
This is my ultimate guide to the top Singapore REITs to buy in 2022.
I want to be clear about something. I compile what I think are my favourite Singapore REITs today (some REITs have also dropped off from 2021)
My selection is based on two big criteria:
- The underlying potential of a Singapore REIT
- The REIT’s potential future dividend yield
Singapore REIT #1: Ascendas REIT
Market cap: S$11.5 billion
Dividend yield: 5.5%
If CICT is the granddaddy of Singapore REITs, Ascendas REIT is the mother of all Singapore industrial properties.
Ascendas REIT is one of Singapore’s top 30 companies. And part of the Straits Times Index (STI).
This is traditionally Singapore’s biggest industrial REIT that owns logistics, warehouse facilities and light-industrial buildings — leasing out to electronics, food, machinery tenants.
Ascendas REIT has been shedding its old skin fast to turn itself into a global business park and data center powerhouse.
And it knows these are the big trends today.
More companies are moving into cloud computing.
More people use smartphone devices.
Even homes are shifting into the concept of the “Internet of Things”.
The 5G revolution, and all of that above requires a place for data.
When you stream a video, post pictures online, or even upload office documents, you need a physical space to store these virtual data. There’s a strong demand for virtual data to be stored physically.
By moving into business parks and data centres, Ascendas REIT captures the high-quality tenants that deal with these data today — DSO National Laboratories, the big Singapore banks, telecommunication companies, fast-growing technology companies that are producing massive cash flow.
In other words, Ascendas REIT wants companies — at the forefront of technology, biomedical science, banking and telecommunications – as their paying tenants.
Ascendas REIT is pretty smart about it.
It’s moving into more freehold leases, such as business park and data centers. This is something different from CICT, where most of the properties are in Singapore. Ascendas REIT is well-diversified across different countries. And its gearing is lower. Which means it still has plenty of room to grow its portfolio.
Source: Ascendas REIT 1Q2022 Presentation Slides
As it grows its portfolio, Ascendas REIT has been growing its DPU steadily over the past years.
In fact, over the last 10 years, it steadily grew its DPU.
Not too bad.
Source: Ascendas REIT’s website
Ascendas REIT’s wide diversification across different industrial properties make it safe.
And what’s even better, is it makes sure not one of its tenants take up more than 5% of Ascendas REIT’s gross rental income.
No matter how big these tenants are in their fields, Ascendas REIT 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.
Ascendas REIT is in my best 10 Singapore REITs for 2022
Singapore REIT #2: CapitaLand Integrated Commercial Trust (CICT)
Market cap: S$14.3 billion
Dividend yield: 4.8%
CICT has been in my number one spot in my top 10 last year. In fact, it’s also one of my top positions in my personal portfolio. But I cannot get away from the fact that this is the biggest Singapore REIT.
And also one of the better run REITs.
After the CMT and CCT merged last year, this beast is even bigger than before, giving it more firepower to fight against some of the overseas properties. And that’s what I like when it comes to big REITs.
I feel safer this way.
Actually, just by owning CICT, you get a good exposure to Singapore’s office and retail assets. CICT gets almost the best of it after its merger. While it tries to go global, most of its assets are still in Singapore.
At S$14 billion market cap, CICT owns 25 properties today — all retail malls, offices and mixed developments.
Source: CICT’s 1Q2022 Presentation Slides
What I like about them is more than just size.
Actually, CICT is an active “asset recycler”.
They know how to actively recycle their assets. This means selling away expensive assets, buying cheaper, higher-quality assets.
Say for example, last year CICT took profits off their 50%-stake in One George Street office asset for S$640 million, at a 3.17% property yield. Then they redeployed these proceeds to buy cheaper assets in Australia with a combined yield of 5.1%:
- 100 Arthur Street
- 66 Goulburn Street
- 101 Miller Street and Greenwood Plaza
These are premium grade offices within Sydney’s CBD regions.
Source: CICT’s 1Q2022 Presentation Slides
I’d say it’s pretty good.
Instantly, it’s yield jumped from 3.17% to 5.1% and they expect DPU to grow by 2.8%. Not too bad.
The problem that I’m seeing for CICT is it’s sort of reached its growth cap to expand its proeprty portfolio. Its leverage is already at 40%. And there’s really not much growth for this Singapore REIT.
While I don’t expect a huge spike in their DPU growth. What I really like about CICT is the stability of its assets.
Where it’s growth potential is not from huge acquisitions. But trying to grow organically. People are returning to offices. Retail is recovering. So there’s a lot of recovery potential for CICT.
First, tenant sales and shopper traffic have yet to hit full capacity like in 2019 — pre-COVID levels.
Last year, tenants sales only recovered to 87.8% of pre-COVID levels. And shopper traffic has recovered only to 61.2% of pre-COVID levels in 2019.
Retail revenues are tied closely to how much tenants make money. If tenants can sell more stuff in their shops, CICT also gets a cut.
Right now, its rent adjustments have came down by about 7.3% compared to 2019.
What this means, is CICT’s retail malls have yet to go back to pre-COVID levels. But it’s important to know it’s recovering well since the height of the pandemic.
It’s crucial to have patience to ride through this period.
What’s more, companies are getting staffs back to their physical workspace. Unlike megacities in the world, In Singapore, it’s impossible to have a pure “work from home” model because of the limited home space in each household.
Even at paying such dividends, CICT’s office occupancy is at 91.5%, and only 37% of people are back in office. It’s still not showing CICT’s true income potential.
In its latest 1Q2022 result,
- Overall occupancy rate — 94%
- 1Q2022 tenant psft sales has gone up 0.6%
- Average Singapore office portfolio rent was stable at S$10.49 psf (up 1.5% q/q)
It’s not fantastic results. But I’m comforted hearing these numbers.
CICT is an asset where you can’t bet on big growth in the its properties. But what comes with is the defensiveness of the asset.
Over the last 10 years, it’s DPU has grown.
Source: CICT’s annual filings
I expect CICT to continue to growing.
CapitaLand Integrated Commercial Trust is in my best 10 Singapore REITs for 2022
Singapore REIT #3: Frasers Centrepoint Trust (FCT)
Market cap: S$3.8 billion
Dividend yield: 5.4%
This Singapore REIT is as steady as a rock.
- First, its 1H2022 performance still doing well
- Occupancy rate improved 0.6% to 97.8% (first chart below)
- Positive rent adjustments of 1.74%
- Net property income (NPI) margins improved 1.2% to 75% (second chart below)
- DPU grew 2.3% to 6.136 cents per unit compared to last year.
Not too bad.
Source: FCT’s 1HFY2022 presentation slides
COVID wrecked retail malls. Yet, FCT shares are still resilient.
And the reason is simple. All of FCT’s 11 retail malls are located deep in Singapore’s heartland area. In fact, FCT is the heartland dominator of Singapore REITs.
I like heartland malls because these malls foot traffic tend to be stable, driven by local residences. Not tourists.
And half of FCT’s tenants are in essential services — mainly F&B and groceries.
These are daily essentials people need.
Think about it: these malls serve as a last mile delivery centers young families — you get off from work, drop by to pick up groceries and dinner.
In fact, 37.5% of FCT’s total income comes from F&B, which makes this Singapore REIT’s tenants even more sticky.
And impervious to e-commerce disruption.
As more people start to go back office, heartland malls become more crucial to serve local residences.
That’s why FCT’s revenues and NPI continued to grow 1.5% and 3.8% respectively in 1H2022.
Last year, FCT completed buying the remaining 63.1% stake of AsiaRetail Fund, which owns five Singapore heartland malls — Tiong Bahru Plaza, White Sands, Hougang Mall, Century Square and Tampines 1.
These malls are all located strategically near the MRT station. And command high foot traffic.
What’s more, these malls are located in places where there are limited or no big competing shopping malls around.
This means, in the long run, Frasers Centrepoint gets to enjoy heartland dominance.
But what I don’t like about FCT is this: you can’t exactly grow beyond the existing heartland malls it owns — there’s only so many heartland malls and limited land space in Singapore.
And most heartland malls are already held by other landlords and REITs. No one is simply going to sell their high quality malls.
This is not going to be a high growth Singapore REIT.
Besides, at 33% gearing ratio, I don’t think FCT will put on more leverage. Since they aren’t going to expand that much. Which makes this Singapore REIT pretty safe.
Source: FCT’s annual filings
So far, FCT’s DPU has been consistently growing. And this is one retail REIT that needs to be in everyone’s portfolio.
I expect with Singapore recovering from COVID + vaccination + people returning to offices, heartland malls are going to be bustling again.
Frasers Centrepoint Trust is in my best 10 Singapore REITs for 2022
Singapore REIT #4: Parkway Life REIT
Market cap: S$2.9 billion
Dividend yield: 2.9%
I know, shares are already close to its all-time high. It’s silly to be buying Parkway Life REIT today.
Hear me out first.
I like Parkway Life REIT because of this: it has rent agreement that goes up with inflation!
Source: Parkway Life REIT FY2021 Presentation Slides
Its contract allows rent to grow along side inflation or profits.
If there’s inflation, this Singapore REIT collects more rent.
If its tenants make more money, rent also increases.
It’s a win-win for Parkway Life REIT. Crisis or not. No matter what’s going on in the world.
What I’m excited about is — half of its income comes from its Singapore hospitals, which is Gleneagles Hospital, Parkway East Hospital and Mount Elizabeth. These are high-quality, highly profitable private hospitals in Singapore.
Source: Parkway Life REIT FY2021 Presentation Slides
And all three hospitals are fully leased out to the hospital operators owned by IHH Group. IHH Group is one of Malaysia’s biggest health care companies. And a sponsor to Parkway Life REIT. IHH Group is 32.9%-owned by Mitsui and 26% owned by Khazanah, the investment holding arm of the Malaysia government.
Singapore is known for its “first class” healthcare services.
According to International Trade Administration, Singapore’s healthcare market is expected to grow to US$50 billion by 2029. And the government is going to spend US$36 billion by 2029.
Singapore is the future medical hub of the region.
And Singapore offers Asia’s best healthcare system. This is reflected by the country’s high life expectancies and lowest infant mortality in the world.
Yet, what’s crucial to know is Singapore faces a lack of medical expertise (personnel’s and facilities) and a greater demand for specialized elderly care amidst rising costs. In fact, it’s also known many affluent patients would fly in from neighbouring countries just to seek medical and aesthetic treatments.
That’s one half of Parkway Life REIT.
More importantly, the other half of its income comes from Japan nursing homes.
These are properties that sit on freehold and they also have agreements that are able to grow alongside high inflation.
In Japan — 1 in 3 Japanese will be over 65 years old by 2050. It’s a pretty tricky problem for Japan.
And Parkway Life REIT solves Japan’s aging problem by renting out space to nursing home operators — big players including K.K. Sawayaka Club, part of the listed company Uchiyama Holdings and also the biggest private nursing home operator in Kyushu.
Source: Parkway Life REIT FY2021 Presentation Slides
What I like best about buying Japan assets is you can borrow debt at a cheap cost. Parkway Life REIT only pays a total 0.56% borrowing cost.
Yet, it produces growing yield year after year. And that’s why its interest coverage is more than 20x. This is pretty unusual for most REITs when you have a higher borrowing costs of around 2.6% and a low yield of 4%.
This is also why Parkway Life REIT is able to produce uninterruptible dividends over the past years. So far, its DPU have more than doubled since 2007. What’s more shares have also grown about 411% since listing. It’s pretty impressive.
In its latest 1Q2022 results, its revenues grew 2.3% higher to S$30.7 million, as a result from higher rent from its Singapore hospitals and the newly acquired Japan assets. Net property income also grew 1.9% to S$29.5 million. It doesn’t have a huge gearing, which means it has more room to grow. Because more of its rent is on a triple net lease, it collects more profits from its. Tenants pay for utilities, operating costs, maintenance and property and insurance costs.
Parkway Life REIT is a defensive REIT. It has a long lease structure that’s supported by a stable stream of positive rental adjustments.
Parkway Life REIT is in my best 10 Singapore REITs for 2022
Singapore REIT #5: Elite Commercial REIT
Market cap: GBP304 million
Dividend yield: 8.5%
This is a unique Singapore REIT.
First, it’s the only Singapore REIT that invests in UK offices. More importantly, all its rent are secured under leases to UK’s Secretary of State for Housing, Communities and Local Government.
So you have the Department of Welfare and Pensions (DWP) taking up 90% of Elite Commercial REIT, with the remaining leases attributed to Ministry of Defence, HM Revenue & Customs. These leases are typically held for 5-10 years.
The DWP is responsible for social welfare, pensions and child maintenance. For example, it spent GBP 212 million in benefits and already planned for GBP 218 million benefits this year.
It’s not some “fly by night” tenant.
Elite Commercial REIT has also made it clear it tries to stabilize as much rent as possible. For instance, it removed “lease break options” from DWP and the Ministry of Defence. What this means is these tenants’ leases are extended till 2028 without any pre-termination options.
But what amazed me wasn’t the just the leases it held.
What struck me about Elite Commercial REIT was its sponsor. At first glance, I wasn’t impressed by the sponsors. These aren’t your Keppel, CapitaLand and Mapletree sponsors.
Elite Commercial REIT’s sponsors aren’t as well-known:
Elite Partners Holdings Pte. Ltd. is the investment holding firm for Elite Partners Group, established to deliver lasting value for investors based on common interests, long-term perspectives and a disciplined approach. Backed by a team with proven expertise in private equity and REITs.
Ho Lee Group Pte. Ltd. has extensive experience across the real estate value chain, from general building construction to industrial and residential development since its inception in 1996. Ho Lee Group Pte. Ltd. was also one of the major sponsors of Viva Industrial Trust during its IPO in November 2013.
Sunway RE Capital Pte. Ltd. is a wholly-owned subsidiary of Sunway Berhad – one of Malaysia’s largest conglomerates with businesses in property development, property investment and REIT, construction, healthcare, hospitality, leisure, quarry, building materials, and trading and manufacturing.
Despite their less heard reputation, Elite Commercial REIT owned properties with very high quality tenants. I’m impressed.
What I’m afraid of is currency risks.
You see, dividends are paid in pence. And over the last 15 years, the GBP has weakened against the SGD by 40%. That’s about 2.6% depreciation a year, on average.
While you collect a high dividend yield, this DPU could drop as a result of a weak GBP.
On the other hand, Elite Commercial REIT has leases that allow them to be pegged to UK’s CPI inflation rate. RENT review is every 5 years. With the next review next year in 2023. Management expects rental to grow between 7% to 8% a year. That counteracts the weak GBP.
Inflation goes up. Rent goes up.
In its latest 1Q2022 results, its distributable income grew 36% as compared to a year ago. DPU grew 4.9% compared to a year ago. So far so good.
Then again, it’s rare to find a Singapore REIT that owns and operates UK’s biggest public service department as a tenant. Together with other UK government agencies. These leases are secured — credit risks is against the UK government. And I don’t think a developed country’s government easily defaults on rent.
If you ask me, at 8% dividend yield — worst case to have its dividend yield halved — already more than compensates for the risks.
Elite Commercial REIT is in my 10 best Singapore REITs for 2022
Singapore REIT #6: Lendlease Commercial REIT
Market cap: S$1.8 billion
Dividend yield: 5.9%
Lendlease REIT is a “mini CICT” — a combination of retail, office and mixed development properties. Except it’s smaller than the granddaddy of Singapore REITs.
Despite its small size, what Lendlease REIT makes up for is its high-quality properties.
Lendlease REIT does not have any underperforming properties. Properties are fully occupied.
And retail malls are unique in their own ways:
- 313@Somerset focuses on the young adults and youths
- Milan office is fully occupied by one of Italy’s biggest telecom companies
Source: Lendlease Commercial REIT’s 1Q2022 Presentation Slides
Earlier this year, it bought the entire Jem stake — the biggest heartland mall in the westside.
Jem is like the third largest sub urban mall in Singapore. Like Serangoon Nex, Jem is perfectly located in the regional catchment of Jurong East. And Jem also, like FCT’s heartland malls, serve as a critical node for local residents.
What’s more, Jem’s offices are already fully leased to the Ministry of National Development with a 30-year lease (till 2045). This further adds income stability to Lendlease REIT.
Once a government takes up space, it’s hard for them to keep moving. And default on rent.
These three big properties are the crown jewel of Lendlease REIT — split between retail and office buildings:
- 313@Somerset — 28% of total portfolio
- Jem Retail — 46.8% of total portfolio
- Jem Office — 12.9% of total portfolio
- Sky Complex — 12% of total portfolio
Source: Lendlease Commercial REIT’s 1Q2022 Presentation Slides
Actually, what’s more interesting is Lendlease REIT has a very small borrowing cost.
In its latest financial half-year results, this Singapore REIT produced about S$28 million of operating cash flow. It only has to pay S$2.7 million of interest. Its Italian building in Milan has a low borrowing cost.
Its operating cash profits covers interest by more than 9 times. The savings on borrowing costs flows directly into unitholders’ pockets — meaning more dividends for investors.
Growth is going to come from the economy opening up from COVID.
Malls are definitely making a comeback. The biggest beneficiaries are going to be the heartland malls (like Jem) and malls that have a unique angle (313@Somerset focused on youth traffic).
What’s more, I suspect Lendlease REIT is going to buy over PLQ soon too. PLQ is owned by its sponsor, Lendlease Group. And it’s the next perfect target for Lendlease REIT.
That should give its DPU a boost.
Lendlease Commercial REIT is in my 10 best Singapore REITs for 2022
Singapore REIT #7: Daiwa House Logistics Trust (DHLU)
Market cap: S$482 million
Dividend yield: 6.5% (projected for 2022)
DHLU is a fresh look into Singapore’s industrial REITs.
At S$546 million, this Singapore REIT owns 14 modern warehouses and logistics facilities across Japan. Now, Japan is big in e-commerce. And there’s a huge demand for third-party logistics (3PL) players.
Naturally, this fits nicely to Daiwa House Logistics Trust story.
Last year, it produced S$55 million of gross rental income on its S$900 million property assets. That’s a 6.5% distribution yield.
Unlike our big Singapore industrial REIT players, what’s interesting about DHLU is this — low gearing. And the thing is, once DHLU pays back the S$68 million of consumption tax through a loan repayment (using IPO money), gearing ratio will drop from 44% to 32%.
That’s going to give DHLU more firepower to borrow to grow its assets.
In fact, DHLU borrows at a tiny 0.9% interest. Its loans are borrowed in JPY, which makes loans cheap.
You see, in Japan, the interest rates are low, in fact Bank of Japan’s (BOJ) interest rate is negative.
Most of their tenants are big blue-chip names. This makes DHLT as a leveraged investment safe. Now, what’s crucial here is even though these properties that DHLT owns are new, all of the properties are already close to full occupancy. This shows the huge demand for modern logistics facilities.
Source: DHLU’s IPO Prospectus
In fact, vacancy rate for logistics properties in Japan has remained at a low 1%.
I won’t say DHLU is a perfect REIT. Some of its logistics properties have short land lease titles. But what it makes up for is much higher distribution yield and cheap borrowing costs.
And what I like to see more in DHLU is a stronger support from its sponsor. It’s disappointing that Daiwa House Industry (one of the biggest Japan property developers) only holds a 10% stake in DHLU.
Source: DHLU’s 1Q2022 Presentation Slides
Which means, while DHLU gets to enjoy “rights of first refusal” benefits from its sponsor, a small stake could also mean the sponsor may not show the expected support shareholders are looking for.
Having said, this is still in my top 10 Singapore REIT because of DHLU’s attractive yield, high quality properties and a safe leveraged play.
In its 1Q2022 results, its actual results were in-line with DHLU’s forecasts (DHLU only IPO-ed late 2021). DHLU produces gross revenues of S$16.87 million, net properties income (NPI) of S$13.3 million and has a DPU of 1.31 cents per unit.
Not too bad.
I expect its DPU to be in line at least 6.5% yield for shareholders, which is more attractive than other blue-chip industrial REITs.
Daiwa House Logistics Trust is in my 10 best Singapore REITs for 2022
Singapore REIT #8: Digital Core REIT (DCR)
Market cap: US$992 million
Dividend yield: 4.7% (projected for 2022)
Honestly, this is one tough choice.
After DCR was listed in Dec 2021, I found this REIT more interesting as a “pure-play” data center REIT than Keppel DC REIT.
DCR’s data centers are all located in the US with a high tenant retention rate. This provides a stable rental income. And even though the REIT’s average leases last for 6 years, all of its lease agreements allow DCR to raise its yearly rent by 1-3%. It’s a good way to overcome inflation.
So then… Why do I like DCR over Keppel DC REIT?
DCR has a much stronger “data-center focused sponsor.
You see, DCR is 33.3% owned by Digital Realty Trust, its sponsor (see below).
In fact, Digital Realty was listed for 17 years. And is about 3 times bigger than Keppel Corp (Keppel DC REIT’s sponsor).
Source: ShareInvestor Webpro
Today, Digital Realty Trust owns and operates more than 290 data centers across the world.
And this means DCR has the priority to to tap on Digital Realty Trust’s ready pool of data centers to grow its assets.
Source: DCR’s IPO Prospectus
What’s more, DCR only has a low gearing ratio of 27%. That’s far lower than Keppel DC REIT at 36%.
This also means as a Digital Core REIT shareholder, you don’t face “capital call” risks versus Keppel DC REIT. There’s a much higher chance for Keppel DC REIT to raise rights issue when they want to buy new properties. Since they are much closer to the gearing limit of 45% as compared to Digital Core REIT.
Don’t get me wrong, I like Keppel Corp as a strong REIT sponsor — big, safe, financially strong. Call me naïve, but when it comes to data center growth, isn’t it better to find a data center focused specialist?
Sure, Digital Core REIT is slightly more expensive than Keppel DC REIT:
- Digital Core REIT yield: 4.4%
- Keppel DC REIT is 4.8%
But what DCR has is its potential to pump more data centers under its belt with its low gearing ratio.
What’s more, I suspect Keppel DC REIT is going to face a much tougher global competition as more landlords, investors and funds are combing the world for high-quality data centres. DCR won’t have that problem since it already has a strong support from its sponsor.
As mentioned, its 1Q2022 results aren’t too bad.
Distributable income was slightly higher than expected.
Source: DCR’s 1Q2022 Presentation Slides
Data centers are fully occupied. Even when it was announced one of their key tenants defaulted, Digital Core REIT was quick to replace their tenants.
And given DCR owns high-quality data centers, it’s easy to find replacement.
Seeing how Digital Core REIT has a pretty decent occupancy rate, I’m not too worried.
In any case, the defaulted tenant only accounts for 7% of Digital Core REIT’s total income. Not that huge.
What I’ll note for DCR is the pay out is in USD. Which means, there’s some foreign currency risk you’ve to manage when you buy this Singapore REIT.
Digital Core REIT is in my 10 best Singapore REITs for 2022
Singapore REIT #9: Mapletree Industrial Trust (MIT)
Market cap: S$6.7 billion
Dividend yield: 5.5%
Today, Mapletree Industrial Trust has 54% of its S$8.8 billion properties in data centres.
Source: MIT 1Q2022 Presentation Slides
Mapletree Industrial Trust is buying more and more data centres.
In fact, it has now 57 data centres across the US, with most of its data centres on a triple net lease structure (tenants pay most of the operating costs).
And as it diversifies into data centres, the stock market continues to push Mapletree Industrial Trust shares higher. Mapletree Industrial Trust is one of the few Singapore REITs that have its shares soar during COVID.
Having said, Mapletree Industrial is still a major industrial REIT.
In its latest 4QFY21/22 results, gross revenues grew 35.5% to S$164 million, net property income (NPI) grew 35.3% to S$124 million and DPU grew 5.8% to 3.49 cents per unit.
Its big jump in revenues and profits were due to income from its newer 14 US data centres bought last year.
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.
Source: MIT 1Q2022 Presentation Slides
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 2021.
Source: MIT FY2021 Presentation Slides
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.
Mapletree Industrial Trust is in my best 10 Singapore REITs for 2022
Singapore REIT #10: IREIT Global
Market cap: S$700 million
Dividend yield: 7.6%
IREIT Global was listed in 2014.
It started with five German offices located in
Munster, Bonn, Darmstadt and Munich. IREIT’s strategy was simple — either buy “grade-A” assets
in mid-tier “B” cities, or mid-tier “grad-B” assets in first tier “A” cities. Management calls it the
ABBA strategy.
I like IREIT because it’s a simple Singapore REIT to understand. There’s no complex merger, no complicated income support agreements when they IPO and this REIT has a well-backed sponsor (I’ll explain later).
IREIT sits on a goldmine of German assets — Munster, Born, Darmstadt and Munich are either
Germany’s administrative centres or key commercial hubs. Its properties are located in the
heart of the region’s central area. This gives IREIT a lot of potential to attract high quality tenants to take up IREIT’s office space.
That’s why IREIT’s German assets are fully occupied.
These blue-chip tenants tend to stay for very long time and the properties’ location can easily attract strong tenants.
What’s more, these properties are freehold. Even when GMG Generalmietgesellschaft mbH (a
major tenant) shifted out last year, it was easy for IREIT to quickly find the German federal government association to replace GMG’s leases.
And this lease is expected to last until at least five years from now.
More importantly, with rising inflation, IREIT’s German offices have an “in-built” rental escalation that’s tied to the country’s CPI.
Rising inflation also means higher rent.
IREIT’s German offices take up 70% of its portfolio today (see below). As it diversifies into other parts of Europe, its sources of revenues get more diversified. I like this.
Last year, IREIT spent about US$178 million to buy Decathlon’s 27 retail outlets in France. Now, Decathlon is a French sporting goods retailer founded in 1976. It has close to 1,700 stores worldwide. And is considered the biggest sporting goods retailer in the world. What’s interesting about Decathlon is it has one of the highest turn-over per square metre of retail space. And has produced EUR11 billion of revenues during the COVID pandemic. IREIT’s agreement is quite interesting. It bought over Decathlon’s French outlets and subsequently leased it back to the sporting goods retailer. This is called a “sale-and-leaseback” arrangement.
A sales-and-leaseback allows the landlord, IREIT to buy the physical asset. This helps Decathlon free up capital so it can reinvest into its own business.
It’s a good move.
But what’s even better is this arrangement also forces Decathlon to have a 10 years lease period with IREIT. All of its 27 outlets are fully occupied by Decathlon.
As a result, over the last few years, IREIT’s revenues, net property income (NPI) has grown steadily as it added more properties. Since 2015, IREIT almost doubled its revenues to EUR52 million, while its NPI grew from EUR24 million to EUR42 million over the same period. Not too bad.
IREIT Global is in my best 10 Singapore REITs for 2022
Final Thoughts — Singapore REITs are the Ultimate “Wealth Defence”
These are the 10 best Singapore REITs to buy in 2022:
- Ascendas REIT
- CapitaLand Integrated Commercial Trust
- Frasers Centrepoint Trust
- Parkway Life REIT
- Elite Commercial REIT
- Lendlease REIT
- Daiwa House Logistics Trust
- Digital Core REIT
- Mapletree Industrial Trust
- IREIT Global
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’re worried of an impending crisis 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
Very nice pick for the 8 REITs, I really like your sharing on recent 2 REIT posts.
Can I guess your remaining 2 for fun? haha
1) Frasers Logistics & Commercial Trust
2) Mapletree Commercial Trust
Looking forward to your next post.
Btw, the first 1 short form should be CICT.
Has your view changed for the mid-term since the fear of raising interest rates? Reits have fallen quite a bit in the last 2 months, good time to accumulate? Thanks.
Hi KT!
Nope, in fact, if REITs fall because of “expected” rate hikes, I’m going to buy more REITs.
It’s the same thing that happened during 2013, when people feared interest rates could shoot through the roof. Back then, US 10-year Treasury went past 3% and scared the hell out of the market. That’s when the buying signal goes green 🙂
Willie
1) 9 of your top 10 babies are sleeping soundly in my pram.
2) I started my Reits collection more than a decade ago. Reits were not in vogue then. Some doubted the Reit’s business model & swear they would never invest in them. Today, they sell like hot buns…
Wow, nice one minx!
Indeed.
Nice update, author! Spent more than 30 mins and enjoy reading it. Although not all of them r my favourite, but this article made me understand each reit better. Still waiting for cheaper price to accumulate more. Good job, Willie. 😉
Hi Vincent!
Thank you for the kind words 🙂
What other REITs do you think should be in the top 10?
Cheers,
Willie
Is there a website to check the dividend payout dates of these reits?
Do you do DCA into all these reits?
Do you have a specific timeline to keep these reits or you keep them forever?
Hi Bill!
You can try https://www.dividends.sg/
I buy when these REITs when they reach my “right price” tag. I share holdings in my Diligence subscription (https://members.dividendtitan.com/)
Typically, I keep them forever unless fundamentals change.
Willie