In our previous article on Real Estate Investment Trust (REIT), we briefly focused on the characteristics and investment benefits of owning a REIT. This article further explains the different categories of a Singapore equity REIT.
Singapore REITs (S-REIT) have a mixture of pure-play REITs which focuses on a particular property class such as retail, offices or residential and the more common “hybridized” types of REITs which typically have 2-3 different classes of properties in their investment trust. Below describes some of the property classes these REITs own:
These REITs invest in various shopping centres or “heartland malls” in Singapore which can be found in prime locations such as Raffles Place or in towns such as Yishun or Choa Chu Kang. An example of a pure-play retail REIT which owns various heartland malls is Frasers Centrepoint Trust (SGX: J69U). Frasers Centrepoint Trust owns popular shopping malls such as Causeway Point and North Point. These malls tend to have key tenants to anchor in traffic to bring in businesses to the smaller tenants as well. These key tenants include Cold Storage, Kopitiam and Popular Bookstore which is owned by Popular Holdings (SGX: P29).
Investors should pay attention to the lease terms and tenor of occupants and whether occupants are charged a fixed rental price plus a sales percentage over a certain level. Other retail REIT which invests in local properties or overseas properties include SPH REIT (SGX: SK6U), CapitaRetail China Trust (SGX: AU8U) and Lippo Malls Trust (SGX: D5IU).
These REITs invest in office properties which lease their spaces to business tenants. Office REIT tend to be supported by retail properties which add to the diversification of property classes. One example is Keppel REIT (SGX: K71U) which owns not only offices in Singapore but in Australia as well.
Investors should consider how business tenants from various industries are affected by the business cycle. A concentration of occupants on a particular industry such as financial services might negatively impact the occupancy rate of office properties should the economy falls into a recession. Other office-related REIT which are combined with retail properties include Capitamall Trust (SGX: C38U) and Suntec REIT (SGX: T82U).
These REITs invest in hospitals, nursing homes, retirement homes, rehabilitation centres and medical office buildings where these underlying property assets rent out their spaces to health care providers. One example is First REIT (SGX: AW9U) which invests in nursing homes and hospitals in Singapore, Indonesia and South Korea. Healthcare REITs tend to be more resilient toward the economy as compared to office REIT and are driven by the level of government funding for healthcare, demographic changes and insurance expenses.
These REITs own properties in the area manufacturing, warehousing and distribution. Industrial-related properties are relatively stable and less cyclical. It is critical to assess the availability and ease of access of transportation links such as roads and ports. One example would be Viva Industrial Trust (SGX: T8B) which holds property assets such as UE Bizhub EAST, Technopark@Chai CHee and Mauser Singapore with a diverse tenants ranging from retail, logistics and electronics. Other examples would include Cambridge Industrial Trust (SGX: J91U) and Mapletree Industrial Trust (SGX: ME8U).
Value in Action
Ever since the founding of the first Real Estate Investment Trust (REIT) in early 2000, The Singapore stock market has seen a variety of new REITS listed on the Singapore Stock Exchange. Although we do see REITs focus on a particular class of property, a combination of diverse party classes are more common in Singapore.
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All views and opinions articulated in the article were expressed in Willie’s personal capacity and do not in any way represent those of his employer and other related entities. Willie does not own any shares in the companies mentioned above.