The Better Diversified-REIT: Suntec Real Estate Investment Trust Vs. Sunway Real Estate Investment Trust

There are many real estate investment trusts in Singapore that focus on just one type of property. For instance, Mapletree Industrial Trust’s (SGX: ME8U) business revolves around industrial real estate while CapitaLand Mall Trust (SGX: C38U) invests only in retail properties.

But, there are some REITs which hold many different types of properties in their portfolio and such REITs may give investors greater diversification.

One good example of a diversified-REIT, in my opinion, can be Suntec Real Estate Investment Trust (SGX: T82U). The REIT invests in both retail and commercial real estate and is perhaps best known for its flagship property, Suntec City.

Interestingly, there is another REIT listed across the Causeway on Bursa Malaysia that also has a diversified property mix. That REIT is Sunway Real Estate Investment Trust (KLSE: 5176.KL). Although Sunway REIT invests across retail, commercial, hospitality, and even medical properties, it is perhaps best known for its Sunway Pyramid Shopping Mall.

So, let’s compare two important aspects  of the business fundamentals of the two REITs to see which may be a better diversified-REIT.

Growth in distribution

One of the most important ways that a REIT can generate a return for its unitholders is through distributions.

Suntec REIT’s distributions have dipped slightly by 0.7% per year over the past five years, moving from 9.93 Singapore cents per unit in 2011 to 9.67 cents in 2015.

Sunway REIT on the other hand, looks more impressive. From FY2011 (fiscal year ended 30 June 2011) to FY2015, Sunway REIT’s distribution per unit had climbed from 6.58 sens to 8.73 sens, representing an impressive annual growth rate of 7.3%. That said, because of the fall in the ringgit over the past few years, the REIT’s distribution growth in Singapore-dollar terms would only be 0.9% per year.


In terms of valuation, Suntec REIT, with its unit price at S$1.54 at the moment, is currently trading at just 0.7 times its tangible book value and is offering investors a distribution yield of 6.6%.

Sunway REIT, on the other hand, is valued at 1.1 times its tangible book value at its current price of RM1.51 per unit. The REIT is also offering a yield of only 5.8% in ringgit terms.

Foolish Summary

Based on what we’ve seen, while Suntec REIT has the more attractive valuation, its growth has been weaker than Sunway REIT. Which factor do you think is more important? Share your thoughts in the comments section below!

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn't own shares in any companies mentioned.