5 Reasons to be Excited About Singapore REITs

The Singapore stock market’s real estate investment trusts (REIT) have gotten off to a steady start in 2016.

According to a market summary from bourse operator Singapore Exchange Limited (SGX: S68) that was published yesterday, the new SGX S-REIT Index has registered a 2.8% year-to-date return.

But wait, there’s more. The following are five things about REITs in Singapore I had picked out from the SGX report that I’m most excited about:

  1. Singapore is home to more than 175 skyscrapers, according to a study by Emporis. The Garden City is also ranked number 11 in terms of cities with the highest number of skyscrapers. Buying a REIT is one way of benefitting from the rents that a skyscraper can bring in without having to paying millions (or billions) for it.
  2. The REIT landscape is diverse. The SGX S-REIT Index has representation from retail REITs like CapitaLand Mall Trust (SGX: C38U), industrial REITs like Ascendas Real Estate Investment Trust  (SGX: A17U), and office REITs such as Suntec Real Estate Investment Trust (SGX: T82U). All told, there’s a delectable REIT-buffet of sorts in Singapore’s stock market for investors to choose from.
  3. The total weighted return of the SGX S-REIT Index has been 52.8% over the past five-plus years from end-December 2010 to end-January 2016. This compares favorably with the broader market, as represented by the Straits Times Index (SGX: ^STI), which is still below its end-2010 mark. Some of the SGX S-REIT’s components have done even better. One good example is Frasers Commercial Trust (SGX: ND8U); it had clocked in a total return of nearly 106% over the same period.
  4. Investors who are interested in REITs might note that the weighted price-to-book ratio for the SGX S-REIT Index was at 0.9 times at the time the SGX report was compiled. The low valuation suggests that there may be a bargain or two worth looking for in the REITs space.
  5. The weighted average distribution yield on offer was 6.5%. For perspective, the SPDR STI ETF (SGX: ES3), an exchange-traded fund which mimics the Straits Times Index, currently offers a dividend yield of just 3.7%. Starhill Global Real Estate Investment Trust  (SGX: P40U), with its yield of 6.9%, is one of the REITs that are offering a higher-than-average yield.

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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 contributor Chin Hui Leong owns units in Suntec REIT