Best REITs In Singapore 2023 For Your Investment Portfolio

Yen Joon

Yen Joon

Last updated 15 June, 2023

 


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Looking for the best Singapore REITs or S-REITs to buy in Singapore in 2023?

Singapore REITs have traditionally been attractive investments that offer stable passive income, averaging 4% to 8% in returns annually. 

In fact, despite facing inflation and massive interest rate hikes, S-REITs still managed to average a 7.6% dividend return last year, which is still higher compared to the Straits Times Index (STI) or even fixed-income instruments like the Singapore Savings Bonds, fixed deposits, and savings accounts.

So, if you’re looking to invest in Singapore REITs in 2023, we’ve curated some of the best S-REITs to invest in.

But first, let’s take a look at how to filter good REITs, so you have a rough idea of what to look out for when considering your options.

Disclaimer: This article on SingSaver serves as an educational piece and is not intended to be personalised advice. When investing, readers should do their own research and understand the associated risks.

 

 


How to filter and pick good REIT stocks

In essence, when looking at REITs, these are some of the aspects to consider:


Dividend payouts

One common mistake investors tend to make is jumping ahead and buying a REIT that offers the highest dividend yield. After all, who wouldn’t want a chance to take a bite at a big juicy dividend? 

However, while dividend yields are important, they don’t give you the whole picture. 

For example, unless the REIT’s earnings are stable, any disruptions would see the share price drop in response, resulting in a fall in dividend yield. 

A high dividend yield could also paint a picture of a company that’s struggling financially and has seen a drop in its share prices. As a result, the dividend yield is high because its share price has decreased. 

Moreover, remember that REITs are required to pay at least 90% of their income as dividends. Therefore paying higher dividends isn't sustainable, as REITs should have some cash reserves as a buffer.

When looking at the performance of a REIT, a better method is to look for growth in a REIT’s distribution per unit (DPU). The DPU is basically the amount of dividend a REIT investor would receive for each share, and is calculated by dividing the distributable income with the total number of units outstanding. 

DPU is more accurate because it shows whether there’s dividend growth each year as it shows that the REIT is sustainable. 

For example, let’s look at Mapletree Logistics Trust, one of the largest logistics S-REITs with a well-diversified portfolio across countries such as Singapore, Australia, Hong Kong, Japan, China, Malaysia, and South Korea. 

Here’s their annual distribution history for the past six years:

Financial year
DPU (in Singapore cents)
FY 2021/22
8.78
FY 2020/21
8.32
FY 2019/20
8.14
FY 2018/19
7.94
FY 2017/18
7.61
FY 2016/17
7.44

As you can see from the above, the DPU for Mapletree Logistics Trust REIT had increased year-on-year, even when the pandemic struck. Its track record of giving out positive dividends to investors was icing on the cake.

Also read: How To Build A Dividend Portfolio For Beginners


Company’s profitability

Aside from the dividend yield, it also pays to know if the REIT is in good financial health. You can do this by examining the gross revenue and net property income (NPI)

Gross revenue is basically the revenue (rental income) a REIT receives from its tenants, while NPI is derived by deducting related expenses such as management fees, maintenance fees, property taxes, and other operating expenses from the gross revenue. 

Again, here’s Mapletree Logistics Trust’s revenue and NPI in the past six fiscal years:

Financial Year
Gross revenue
Net property income (NPI)
2021/22
S$678.55M
S$592.1M
2020/21
S$561.1M
S$499.1M
2019/20
S$490.9M
S$438.5M
2018/19
S$454.3M
S$389.5M
2017/18
S$395.2M
S$333.8M
2016/17
S$373.1M
S$312.2M

As we can see, the company's gross revenue and NPI have grown in the past six years. This shows that Mapletree Logistics Trust efficiently generates profit while reducing operating costs. A positive NPI also results in higher DPU.  

Conversely, a declining NPI could mean the REIT’s portfolio has a lower occupancy rate or a lower rental reversion (negative rental rates upon lease renewal). It could allude that the properties are depreciating in value because of a lack of upgrading/maintenance. 

Next, look at a REIT’s property yield, which evaluates the ability of a REIT to generate income in relation to the property valuation. In other words, a good property yield indicates that the properties have high valuations and thus can generate healthy rental returns. 

On the one hand, a low property yield suggests that a REIT isn’t maximising the income potential from its property portfolio. That said, high property yields could also mean that the REIT charges high rental rates, which is unsustainable in the long run.

If you want to know whether the property yield is sustainable, you can compare to see if there's year-on-year growth over a few years. You can also compare its year-on-year property yield to similar REITs.

Although property yield isn’t easily available in annual reports, you can calculate it with the following formula: 

Property yield = NPI ÷ property valuation X 100%

According to Mapletree Logistics Trust’s 2021/22 annual report, the total market valuation of its assets (assets under management) was S$13.1B, 19.24% higher year-on-year compared to S$10.8B in 2020/21. 

Since the NPI in 2021/22 was S$592.1M, the property yield in 2022 was: S$592.1M/S$13.1B X 100% = 4.52%

In the fiscal year of 2020/21, Mapletree Logistic Trust's property yield was 4.62%, which means it was 0.10% higher than in 2021/22.

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Aggregate leverage

Also known as gearing, aggregate leverage refers to a REIT’s debt-to-asset ratio and is a metric used to determine a REIT’s financial leverage. 

Aggregate leverage is important to investors because a low aggregate leverage ratio indicates that a REIT has the capacity to take on more debt. Conversely, a high aggregate leverage ratio means it has more debt and may struggle to repay it.

In Singapore, the aggregate leverage ratio limit is 50%, which was increased from 45% by the Monetary Authority of Singapore (MAS) in April 2020 to give S-REITs more flexibility to deal with challenges caused by the COVID-19 pandemic. 

Net aggregate leverage can be calculated by dividing the total debt by the total shareholders' equity. 

For instance, Mappletree Logistic Trust recorded an aggregate leverage of 36.8% in FY 2021/22 — well below the 50% threshold.  


Occupancy rate

Occupancy rate is the ratio of rented space to the total amount of available space and gives you a good sense of the REIT’s cash flow and management.

For example, a retail REIT that owns a mall with a 35% occupancy rate tells you that something is amiss with the mall, whether it’s the location, surrounding amenities, or the REIT manager.  


Net asset value

Next is net asset value (NAV), which is the net market value of the REIT’s assets, less all its liabilities. Divining the NAV by the total units issued will give you the net asset value per unit. This tells you the net value of a REIT’s assets per share.

NAV = value of assets - value of liabilities/total shares outstanding

NAV is useful as an investor because it tells you whether a REIT’s share is overvalued or undervalued when you compare it to the REIT’s share price. For instance, if the NAV is below the share price, this makes the share an attractive buy. 

With that out of the way, let’s take a look at the best REITs in Singapore to buy in 2023:


 

 

 


Best REITs in Singapore to own in your portfolio in 2023

1. Mapletree Logistics Trust

Q3 FY2022/23

Dividend yield 4.86%
DPU 6.69¢
NPI S$157.19M
Aggregate leverage ratio 36.8%
Net asset value per unit S$1.41

We’ve already given a few excellent examples of Mapletree Logistics Trust above, so no surprises here. But in case you missed out, Mapletree Logistics Trust has seen year-on-year growth in its DPU, revenue, and NPI — a remarkable feat considering that most businesses have suffered due to inflation and economic challenges.

According to Mapletree Logistics Trust’s Q3 FY 2022/23 report, it has S$13.1B worth of assets under management and a 96.7% occupancy rate. 

mappletree logistics trust geographical diversification
Source

As mentioned previously, Mapletree Logistics Trust also has a well-diversified portfolio with 183 properties across different sectors such as F&B, logistics facilities, and consumer staples.

Its portfolio is also spread geographically in countries like Singapore, Hong Kong, China, Japan, and South Korea.

With the REIT in good financial health, Mapletree Logistics Trust acquired 20 new properties in countries such as Australia, Hong Kong, Malaysia, and China new properties with a total of S$1.8B in value. 

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2. Mapletree Industrial Trust

Q3 FY2022/23

Dividend yield 5.24%
DPU 2.22¢
NPI S$157.1M
Aggregate leverage ratio 37.4%
Net asset value per unit S$1.41

Being an industrial REIT, its portfolio consists of data centres, business parks buildings, high-tech centres, and flattened factories, among others.

In its 2021/22 annual report, Mapletree Industrial Trust’s assets under management increased from S$6.8 billion from the year before to S$8.8 billion, mainly because of acquisition of new data centres in North America. 

mapletree industrial trust aum
Source

Meanwhile, their tenants are diversified across many different sectors such as manufacturing, information and communications, and financial and business services. 

Financial year DPU (in Singapore cents)
FY 2021/22 13.80
FY 2020/21 12.55
FY 2019/20 12.24
FY 2018/19 12.16
FY 2017/18 11.75
FY 2016/17 11.39

The DPU has also steadily increased over the last six years. 

mapletree industrial statement of profit or loss

There has also been an increase in investments over the years, including capital appreciation and distribution yield. 

Its aggregate ratio has also dropped quarter-on-quarter from 38.4% to 37.2% in Q3 FY2022/23. 

3. Parkwaylife REIT

 FY2022/23

Dividend yield 2.74%
DPU 14.08¢
NPI S$121.9M
Aggregate leverage ratio 36.4%
Net asset value per unit S$2.33

Parkwaylife REIT is healthcare REIT and is perhaps known for owning ‘atas’ hospitals in Singapore such as Parkway East Hospital, Gleneagles Hospital, and Mount Elizabeth Hospital. 

However, it also owns medical facilities and nursing homes in Japan and Malaysia. Most of Parkway Life REIT’s assets are in Japan, and the company has also been acquiring new medical facilities and nursing homes in Japan over the years.

As a rapidly ageing nation, Japan requires more medical attention, good medical facilities, medical equipment, and medicine. As such, this makes Parkwaylife REIT a good REIT to have in your portfolio since the demand for healthcare is high in Japan.

Moreover, medical facilities will always be needed because people will fall sick and need access to medical equipment, medicines, etc. 

 
FY2022
FY2021
Gross revenue
S$130M
S$120.7M
Net property income (NPI)
S$121.9M
S$111.2M
Distributable income 
S$87M
S$85.2M
Distribution per unit 
14.38¢
14.08¢

According to Parkway Life REIT's FY2021/22 statement, the company's gross revenue increased by 7.7% from S$120.7M in 2021 to S$130M in FY2022. Meanwhile, NPI also increased to S$121.9M from S$111.2M. 

4. CapitaLand Ascendas REIT

FY2022

Dividend yield 5.7%
DPU 15.25¢
NPI S$968.8M
Aggregate leverage ratio 36.3%
Net asset value per unit S$2.37

Formerly known as Ascendas REIT, CapitaLand Ascendas REIT is Singapore’s first and largest listed business space and industrial REIT and is one of the blue-chip S-REITs to invest in.

Source

Like most good REITs, its portfolio is diversified across different sectors and countries. It holds 200 commercial, business, and industrial properties in Singapore, Australia, the United States, United Kingdom, and Europe.

Financial year DPU (in Singapore cents)
FY 2017/18 15.98
FY 2018/19 16.03
FY 2019* 11.49
FY 2020 14.68
FY 2021 15.25
FY 2022 15.79

The DPU increased from 15.25¢ from a year before to 15.79¢ in FY2022, while there’s also growth in gross revenue, NPI, and distributable income from the past year.

Additionally, the Ascendas REIT has also been acquiring new data centres, business centres, and logistics facilities in the United States and Singapore, while upgrading its existing assets.

*Due to a change in financial year end, FY2019 spans from 1 April 2019 to 31 December 2019. 

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5. CapitaLand Integrated Commercial Trust

2H2022

Dividend yield 4.63%
DPU 5.36¢
NPI S$541.1M
Aggregate leverage ratio 40.4%
Net asset value per unit S$2.06

CapitaLand Integrated Commercial Trust is Singapore’s largest retail REIT with a market capitalisation of S$24.2 billion.

Previously, it was known as CapitaLand Mall Trust before it merged with CapitaLand Commercial Trust in November 2020, combining the former's retail portfolio with the latter's office assets, thus becoming one of the biggest REITs in Asia Pacific in the process. 

CapitaLand Integrated Commercial Trust owns shopping malls such as Bugis+, Bugis Junction, Tampines Mall, IMM Building, and Junction 8; integrated developments such as Funan, Raffles City, and Plaza Singapura; and Grade A office buildings such as Capital Tower, CapitaGreen, and Six Battery Road. 

capitaland integrated commerical trust 2h2022
Source

Despite setbacks caused by the economy and rising interest rates, CapitaLand Integrated Commercial Trust saw higher NPI thanks to new acquisitions, higher gross rental income and gross turnover. Moreover, its retail malls and offices continue to see an uplift in profitability and valuation, thanks to an enlarged portfolio of tenants, rejuvenation of its retail and lifestyle offerings, and diversified revenue streams. 


Conclusion

Keep in mind that these are not ‘must haves’ in your REIT portfolio, as there are many other S-REITs that have performed well and seen growth. 

However, the bottom line is that you should diversify your investments, and the five above not only offer some of the best dividend returns, but they also expose you to industrial, commercial/office, healthcare, and retail REITs. Remember to also look at a REIT’s financial reports to analyse its growth prospects, portfolio, and investment returns. 

Lastly, you can examine a REIT’s attractiveness with metrics like DPU and NPI, and comparing its stock price. 

Start building your REIT portfolio by opening an online brokerage account now.

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⚡Flash Deal⚡: Be one of the first 100 applicants to snag an additional S$100 cash via PayNow on top of existing rewards when you open a Webull account. Valid till 5 June 2024. T&Cs apply.

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Alternatively, score an Apple Watch SE (GEN 2) GPS 44mm (worth S$$432.95) or S$450 voucher or S$400 cash when you sign-up and transfer-in a minimum value of USD10,000 before 31st May 2024. Valid till 5 June 2024. T&Cs apply

Webull Welcome Offer: Enjoy up to 8.4% Moneybull yield, up to USD 1,050 cash vouchers, and up to USD 2,150 transfer-in rewards when you complete additional requirements. Valid till 31 May 2024. T&Cs apply.



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Why Are Singapore REITs Underperforming and What Can Investors Do?
Best ETFs In Singapore For Tracking Stocks, Bonds And REITs
How to Build a Passive Income Portfolio Using ETFs (And Why You Should)

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In my past life, I was always broke because of a lack of financial literacy. Now, I publish a few posts every week* on personal finance to help you manage your money better. *I mean, I’ll try

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