Wednesday saw Sasseur REIT (SGX: CRPU) making its trading debut on the Singapore stock market. The REIT, which became the first outlet mall REIT to be listed in Asia, owns four retail outlet malls in China. Based on its listing price of S$0.80 for its initial public offering (IPO), Sasseur REIT is expected to produce a distribution yield of 7.5% for the 2018 forecast period, which runs from 1 March 2018 to 31 December 2018.
Sasseur REIT’s 7.5% yield ranks quite highly amongst the nine other retail REITs listed in Singapore. According to a recent report from Singapore Exchange Limited (SGX: S68), the nine trusts have a total market capitalisation of S$21.4 billion and an average distribution yield of 6.6%.
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With that, here are the top three highest-yielding retail REITs (figures as of 27 March 2018):
1. Taking the top spot is Lippo Malls Indonesia Retail Trust (SGX: D5IU) with a distribution yield of 8.9%. The REIT has a total net lettable area of 910,582 square metres from its ownership of 23 retail malls and seven retail spaces in Indonesia. The REIT’s properties are also located in the country’s major cities that all have a large middle-income population. In 2017, the REIT’s distribution per unit (DPU) grew by 0.9% to 3.44 Singapore cents, on the back of a 5% increase in gross revenue to S$197.4 million. The top-line growth was due to contributions from the newly acquired Lippo Mall Kuta and Lippo Plaza Kendari, and positive rental reversions from existing leases.
2. With a yield of 8.2%, Dasin Retail Trust (SGX: CEDU) steals the second spot. The trust, which went public in January 2017, has a portfolio of four retail malls located in Zhongshan City, China. Together, the malls have a net lettable area of 244,055 square metres. Dasin Retail Trust is the “only China retail property trust providing direct exposure to the fast-growing Pearl River Delta region.” In 2017, the trust’s gross revenue came in at S$57.7 million, 16% more than the forecast given in its IPO prospectus. Dasin Retail Trust ended the year with a DPU of 7.16 cents, 6% higher than expected.
3. Coming in third is BHG Retail REIT (SGX: BMGU), the first pure-play China retail REIT sponsored by a leading integrated retail group based in China. The REIT’s portfolio currently comprises five shopping malls with a total net lettable area of 155,415 square metres. The retail assets are Beijing Wanliu (60% interest), Chengdu Konggang, Hefei Mengchenglu, Xining Huayuan, and Dalian Jinsanjiao. In 2017, the REIT’s gross revenue increased by 3.1% to S$64.5 million, while its DPU grew by 2.8% to 5.47 Singapore cents. The REIT said that “strong rental uplifts as well as inbuilt rental step-ups” contributed to its gross revenue growth.
REITs with high distribution yields may not necessarily make great investments. As Foolish investors, we must look at other aspects of a REIT, such as its interest cover, property yields, gearing ratio, future growth drivers, and so on, before investing in them.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Singapore Exchange Limited. Motley Fool Singapore contributor Sudhan P owns shares in Singapore Exchange Limited.