Real estate investment trusts (REITs) own assets such as shopping malls, offices, warehouses, business parks, hotels, and more, in their portfolio.
REITs are especially attractive for retirement portfolios since they have high distribution yields and give out regular distributions, usually every quarter. Here, let’s look at the three highest yielding REITs in the Singapore stock market (data from a Singapore Exchange report; as of 22 May 2019).
Taking the top spot is Lippo Malls Indonesia Retail Trust (SGX: D5IU). The Indonesian-based retail REIT, which owns 23 retail malls and seven retail spaces located within other retail malls, has a yield of 10.2%.
For the first quarter of 2019, the REIT’s distribution per unit (DPU) tumbled 17.9% to 0.55 Singapore cents mainly due to lower gross rental income and net property income (NPI). However, on a quarter-on-quarter basis, DPU rose 83%. The increase was due to higher NPI and savings from lower finance cost. The following summarises the REIT’s latest financial performance:Source: Lippo Malls Indonesia Retail Trust Q1 2019 earnings presentation
Year-to-date, Lippo Malls has produced a total unitholder return of 22.9%.
Coming in second is First Real Estate Investment Trust (SGX: AW9U), with a yield of 8.7%. First REIT is a healthcare REIT with 20 properties located in Indonesia, Singapore, and South Korea. Year-to-date, First REIT has given unitholders a total return of 4.9%.
In November 2018, units in the REIT fell substantially due to various possible reasons. First REIT’s unit price has not recovered back to its heydays since then. For the REIT’s 2019 first-quarter, rental and other income inched down by 0.2% to S$28.6 million while NPI fell 1.4%. However, DPU was flat at 2.15 Singapore cents.
Victor Tan, chief executive of First REIT’s manager, Bowsprit, said the following in the earnings release:
“Despite a marginal decline in our rental income and NPI, the Trust continues to deliver stable returns to our Unitholders. Our gearing also remained steady at 34.5% as at 31 March 2019, giving us ample headroom for further yield-accretive acquisitions. Going forward, the Trust will continue to explore opportunities to unlock the value of our existing portfolio through asset enhancement initiatives or strategic divestment of assets for capital gains. With OUE Limited (“OUE”) and OUE Lippo Healthcare Limited (“OUELH”) on board, we will also look at diversifying our income streams by expanding into other geographical markets.”
OUE Lippo Healthcare Ltd (SGX: 5WA) and OUE Ltd (SGX: LJ3) together acquired a 100% stake in Bowsprit. With that, OUE Lippo Healthcare joined Indonesian-listed PT Lippo Karawaci Tbk as First REIT’s co-sponsor.
Sasseur Real Estate Investment Trust (SGX: CRPU) slots into the third spot with a distribution yield of 8.6%. Sasseur REIT is the first outlet mall REIT listed in Asia with four retail outlet malls located in China’s fast-growing cities such as Chongqing, Kunming and Hefei.
For the first quarter of 2019, Sasseur REIT’s DPU rose 9.3% to 1.656 Singapore cents. The increase came on the back of EMA (Entrusted Management Agreement) rental income growing 2.4% to S$30.9 million. To learn more about the REIT’s latest financial performance, you can head here.
Year-to-date, Sasseur REIT has produced a total unitholder return of 29%.
The Foolish bottom line
Lippo Malls Indonesia Retail Trust, First REIT, and Sasseur REIT may have high distribution yields. However, that should not be the sole reason to invest in them. As Foolish investors, we must look at other aspects of REITs such as interest cover, property yield, gearing ratio, and future growth drivers 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 recommendations on First Real Estate Investment Trust and Singapore Exchange. Motley Fool Singapore contributor Sudhan P owns shares in Singapore Exchange.