With life expectancy in Singapore increasing, many people are expected to spend more time in retirement. While higher life expectancy is certainly a good thing, it could turn into a financial burden if we do not manage our finances wisely. Hence, it is important that retirees put their money to good use. The ideal investment for retirees should: Be resilient to economic downturns Have predictable and stable dividends Have relatively high yields Through my research, I have found two real estate investment trusts (REITs) in Singapore that I believe…
With life expectancy in Singapore increasing, many people are expected to spend more time in retirement. While higher life expectancy is certainly a good thing, it could turn into a financial burden if we do not manage our finances wisely. Hence, it is important that retirees put their money to good use.
The ideal investment for retirees should:
- Be resilient to economic downturns
- Have predictable and stable dividends
- Have relatively high yields
Through my research, I have found two real estate investment trusts (REITs) in Singapore that I believe fit the bill.
Mapletree Commercial Trust (SGX: N2IU)
Since listing in 2012, Mapletree Commercial Trust has been one of the most consistent REITs in Singapore, increasing its distributions to unitholders each year. Even last year, when many REITs faltered due to higher interest rates and geopolitical uncertainty, Mapletree Commercial Trust still manage to squeeze out a 0.6% increase in distribution per unit (DPU).
Besides its stellar track record, there are convincing reasons to believe that Mapletree Commercial Trust can continue to do well in the future.
For one, VivoCity, one of the REIT’s key assets, looks well positioned for higher rental income. The shopping mall just underwent a major facelift, with the extension of basement one and the addition of a public library on level three. Even with ongoing renovations, VivoCity had a 3.1% increase in footfall in the first half of FY18/19.
Two, Mapletree Commercial Trust has a well-managed balance sheet and a low gearing ratio of 34.8%, well below the 45% regulatory limit. The low debt level affords it an additional S$741.5 million in debt headroom to fund acquisitions for growth if an opportunity unfolds.
At its current unit price of S$1.70, the trust sports a distribution yield of 5.2%. While the yield may be below the average REIT yield, Mapletree Commercial Trust capacity for growth, resilient portfolio and financial muscle still makes it a good option for income-hungry investors.
CapitaLand Mall Trust (SGX: C38U)
While the proliferation of e-commerce has put pressure on traditional retail, CapitaLand Mall Trust has continued to thrive. In the first nine months of 2018, the trust managed to grow its distributable income and DPU by 3.3% and 3.0% respectively.
More importantly, its management has done very well in capital recycling and has consistently planted seeds for growth. In November 2018, CapitaLand Mall Trust completed the remaining 70.0% stake in Westgate that it did not already own. The retail complex is strategically located near Jurong East MRT station. With the government’s plan to add 20,000 homes and create 100,000 new jobs in the Jurong Lake District, Westgate is well-placed to take advantage.
Funan, which was closed for redevelopment since 2016 is also expected to reopen in the second quarter of this year, with the new property 400,000 square feet larger than the old one. As Funan has not been contributing rental income to the REIT for the past three years, the reopening of the mall will be akin to a new acquisition and will likely boost DPU further this year.
At its current unit price of S$2.35, CapitaLand Mall Trust has a yield of 4.9% that looks set to increase in 2019.
Stop worrying about the uncertain REITs market with our new Complete Guide To Buying The Best Singapore REITs. We give you 3 quick ways to easily value your REITs so you save tons of research time. Value your REITs today so you know exactly when to buy, sell or hold. Simply enter your email here and we will rush the 42-page PDF immediately to your inbox...for FREE!
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned. Motley Fool Singapore has a recommendation for CapitaLand Mall Trust and Mapletree Commercial Trust.