These 4 REITs Can Help Investors Diversify Into Foreign Property Markets

An important concept in investing is diversification. We do not want to have too many eggs in one basket.

There are many aspects to diversification. For instance, there’s diversification through industry, meaning to say we can hold stocks of companies from different types of industries. In this way, if one industry zigs, the others may zag and provide some ballast for our portfolio.

Then, there’s also diversification through geography – if a certain region or country isn’t doing well, there would be others that can help pick up the slack.

The thing about geographical diversification is that we need not invest in foreign-listed stocks to be geographically diversified. In Singapore’s stock market, there are many listed entities that have significant businesses beyond our local shores.

In this article, I want to look at a few real estate investment trusts and business trusts that are investing heavily in foreign properties and thus could help provide geographical diversification for investors.

There are a number of China and/or Hong Kong-focused REITs in Singapore’s stock market and two of them are CapitaLand Retail China Trust (SGX: AU8U) and Mapletree Greater China Commercial Trust (SGX: RW0U).

The former has 11 shopping malls that are located in six different Chinese cities, including Beijing and Shanghai. Meanwhile, the latter currently holds three properties in Hong Kong (a retail mall with an office element), Beijing (an office building with a retail atrium), and Shanghai (a business park development).

In its latest earnings release, CapitaLand Retail China Trust shared some statistics on China’s retail environment. The REIT said that the country’s retail sales grew by 10.4% to RMB33.2 trillion in 2016. Meanwhile, the level of urban disposable income and expenditure per capita in China had stepped up by 5.6% and 5.7%, respectively, during the year.

Mapletree Greater China Commercial Trust’s Hong Kong property accounts for around 70% of its rental income. In its latest earnings release, the REIT mentioned that total retail sales in Hong Kong had declined by 8.6% year-on-year in the first 11 months of 2016.

Investors looking for exposure to India’s healthcare market can study RHT Health Trust (SGX: RF1U). The business trust owns a portfolio of healthcare assets in India; these assets consist of 12 clinical establishments, two operating hospitals, and four greenfield clinical establishments.

RHT Health Trust recently commented in its earnings release that India’s “large, expanding and increasingly affluent population has led to an increase in demand for more sophisticated medical treatments.” But, “the number of existing hospital beds is not sufficient to meet this demand,” added the trust.

Let’s turn our eyes to Europe now. In Singapore’s stock market, one REIT that invests predominantly in Europe is IREIT Global (SGX: UD1U). Its portfolio currently comprises of five freehold commercial properties in Germany (located in Berlin, Bonn, Darmstadt, Munster, and Munich).

The REIT’s manager recently got acquired and the new owner “expects to contribute to the growth of IREIT with its pan-European network combined with strong local operational expertise and existing pipeline of real estate transactions in Europe.”

IREIT Global’s new manager also has the intention of widening the REIT’s investment mandate to include retail and industrial properties in Europe, alongside the current commercial focus.

One risk that investors should pay attention to with IREIT Global is customer-concentration – the REIT’s top five tenants currently account for over 97% of its total rental income.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.