Real estate investment trusts (REITs) in Singapore’s stock market can be divided into those with assets primarily located in Singapore, and those with most of their assets located overseas.
It is common to find that the former group of REITs are usually priced at a premium due to their lower exposure to currency volatility. But, REITs with predominantly Singapore-based assets can still have high dividend yields (technically, a REIT’s dividend is known as a distribution, but let’s not split hairs here). With this said, I decided to run a quick screen to find the highest-yielding REITs from this group.
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Topping this list with a trailing dividend yield of 8.7% is the owner of industrial properties and business parks, Soilbuild Business Space REIT (SGX: SV3U). The REIT counts [email protected] Business Park, Bukit Batok Connection, and Solaris as part of its portfolio of properties. In total, the REIT owns 11 properties in Singapore and two in Australia.
In 2018, Soilbuild Business Space REIT saw its gross revenue fall by 1.2% and distribution per unit sink by 7.5%. The main culprits were the divestment of one of the REIT’s properties in February 2018, and poorer performances from a few of the REIT’s other properties.
Not far behind is AIMS AMP Capital Industrial REIT (SGX: O5RU), which also focuses on industrial properties. The REIT, which has a dividend yield of 7.2%, is managed by a joint-venture between two entities, namely AIMS Financial Group and AMP Capital. AMP Capital is part of AMP Group, which is one of Australia’s largest retail and corporate pension providers.
AIMS AMP Capital Industrial REIT, or AA REIT for short, currently owns 26 industrial properties, 25 of which are located in Singapore. In its latest earnings update for the quarter ended 31 December 2018, the REIT’s revenue increased by 3.3% but its DPU declined by 4.6%.
In November 2018, AA REIT announced that AIMS Financial Group wants to purchase AMP Capital’s 50% stake of the REIT’s Manager. In the November 2018 announcement, it was mentioned that the deal was supposed to be completed in December 2018. But on 24 December 2018, AA REIT said that the transaction deadline had been pushed to 28 February 2019. Earlier this month, the REIT announced that the deal did not take place on 28 February 2019 because there was a disagreement between AIMS Financial Group and AMP Capital. AA REIT’s Manager does not expect the collapse of the deal to have any impact on the REIT’s operations.
Completing this list is Oue Commercial Real Estate Investment Trust (SGX: TS0U), which owns three landmark office buildings in Singapore – OUE Bayfront, One Raffles Place, and OUE Downtown – and Lippo Plaza, a grade A office building in Shanghai. At its recent unit price of S$0.50, OUE commercial REIT has a dividend yield of 7.0% and trades at a 30% discount to book value.
In 2018, the REIT’s revenue inched up 0.1%, but its DPU declined by 3.9% largely due to an enlarged unit base from a rights issue.
The Foolish take
Although REITs with predominantly Singapore assets tend to be priced at a premium, they are less exposed to currency risk, which makes them an attractive proposition for more conservative investors. The above-mentioned REITs currently spot the most attractive yields in the market among its peers. However, before making an investment decision, investors should also consider other aspects of a REIT, such as its management strength, gearing levels, and the resilience of its portfolio.
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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 Jeremy Chia doesn't own shares in any companies mentioned.