Your Retirement Guide: 8 Best Singapore REITs to Buy Now

Pandemic or recession, here’s what you exactly need to know about the best Singapore REITs to buy now.

In the mid of 2000, Blackstone Group, a major investment firm completed purchasing one of the largest US office property buyouts at US$37.7 billion.

People thought they were crazy. It was then the largest property buyout at the height of a property bubble. Yet the company profited massively from the investment.

You see, timing on the market is important. But the “smart money” like Blackstone Group knows what beginner investors lack – They are fully aware how to take advantage of properties to grow their assets.

In fact, today, Blackstone is continuing to grow and managed more than US$540 billion of assets. And much of their success lies in picking good property investments.

REITs Still probably the most Stable Form of Leveraged Investing for Dividend Income

If you're earnings investor in retirement or growing your wealth for retirement, you need to think like a Blackstone.

At its heart, a REIT is definitely an asset class full of value. And it's a wonderful way for everyday investors to develop their wealth safely through properties.

Just like how Blackstone made money on their basket of property investments.

Yet many investors become if they don't know this asset class. Whenever a recession hits, they sell off some of the most valuable assets in their portfolio. Just look at the recent Singapore REIT performance in the chart below.

You see, a REIT, like every other property investing, has a very simple business model. And it's things i like to call a “virtual bank”.

Let me explain.

A REIT borrows cheap, short-term debt from the bank, and invests into “long-term”, high-yielding properties like retail and offices.

If you invest in a REIT, you get to keep the rental income a REIT collects as dividends. While awaiting the property's value to develop.

This makes REITs the most profitable and stable form of leveraged investing. Especially if you wish to retire with a dividend portfolio.

Pandemic or Crisis- REITs Really are a Dividend Machine

Now, I'm writing this because REITs have performed poorly due to the whole pandemic crisis.

And I wish to share with you what I think are the very best Singapore REITs out there.

Actually, I used to be a bonds analyst checking out which companies wouldn't go bust. And that i applied this rigorous research to REITs, to ensure their dividends don't go bust within the long run.

Especially if you're building an income portfolio for retirement.

So, if you want to invest in a REIT, you need to make sure they're the best. And they can survive a long crisis.

Onward.

Best Singapore REIT No. 1 – CapitaLand Integrated Commercial Trust

Ticker: C38U.SI

Market Cap: SGD13 billion

Forward Dividend Yield: 6.20%

CapitaLand Integrated Commercial Trust, or CILT, after the merger of CapitaLand Mall Trust and CapitaLand Commercial Trust, may be the biggest REIT in Singapore.

It's also the third largest REIT in Asia.

And it's interesting, you see, a particular group of Singapore REITs undergoing major shifts.

I'll explain.

For one, you're seeing REITs owning more and more mixed-development sites – combining both retail and commercial spaces into one area.

This makes a lot of sense here, especially with a limited land supply in Singapore. Many properties have to become more efficient to provide individuals with a convenient “work-life-play” environment.

Another is this – using the pandemic crisis ongoing, using a mix of retail and offices properties allows some sector diversification.

While everyone is aware of the supposedly “REIT Armageddon”, shopping malls are wrecked by the new normal of “work from home”. And a lot of people are sticking to shopping online.

But measuring only half the story told.

CILT: A “Recovery” Dividend Stock

A large amount of retail malls are still very much in huge demand in the suburban area.

With Phase 2 out, CILT's retail properties’ visitors has already recovered to 60% of pre-pandemic levels.

What's more interesting is that this.

Tenant sales have recovered to 90% of its pre-pandemic levels.

And many the REIT is still able to lock in tenants, with occupancy rates close to full. These suburban malls are a very good catchment area for the local population living away from the city centre.

You see, lots of people still enjoy shopping during these heartland areas. Usually, making their food shopping. In fact, CILT retail malls' supermarket sales go up by 9.6% every year. In the latest quarter, home furnishing, sporting goods, electronics all seen a rise in sales.

Its worst hit is Raffles City Singapore, which saw a significant drop in rental reversions. But that's because Raffles City is situated in the city centre.

Of course, CILT's even the largest owner of Grade-A prime assets in Singapore's CBD. These top office spaces are well occupied by a few of the biggest, profitable companies on the planet. From banks to tech, to aviation and commodities companies.

While many people are working from home, these companies still retain their tenancy using the properties. You'd see that all of its properties are still well-occupied.

Sometimes, investing can be simple.

Best Singapore REIT No. 2 – Ascendas Investment Trust

Ticker: A17U.SI

Market Cap: SGD11 billion

Forward Dividend Yield: 4.56%

Ascendas Real Estate Investment Trust is traditionally Singapore's largest industrial REIT.

But recently, you'd see Ascendas diversifying its “property mix”, moving into “business & science” parks. Which has done very well for them.

You see, these properties are the place to find some of the biggest, most stable companies in the technology, financial and biomedical sectors – DSO National Laboratories, DBS Bank, Singapore Telecommunications and J.P.Morgan Chase Bank are some of their biggest tenants.

This enables them to capture companies at the forefront of technology, finance and biomedical science.

And not just one single tenant takes up more than 5% of Ascendas' gross rental income.

This is essential here. Because Ascendas does not have to depend on any tenants to grow. If someone decides to leave, Ascendas can easily fill its space without worrying about crushing its rental income.

This diversification makes investing in Ascendas REIT safe.

In fact, during the pandemic crisis, only 9 tenants from its over 1,400 tenants have pre-cancelled their leases.

And they still managed to maintain at least 91% occupancy rate.

With Ascendas' track record of accumulating high quality properties, it shows in their financial results.

Ascendas' Financials Staying Strong

Ascendas' 1H2021 gross rental income grew 14.6% from SGD455 million to SGD521 million. Its total distribution was higher by 3.7% to SGD263 million during the same period.

Ascendas' continues to gush free cash flow (FCF). In fact, FCF grew from SGD35 million in FY2004 to some massive SGD612 million in FY2021. Note: FY2021 results take into account 9 months of rent, due to a change in financial period ending from Mar to Dec.

If you'd held Ascendas since its IPO in 2002, you'd make more than 500% (as at Dec 2021) on your capital, including dividends. That's returns of near to 11% per year.

I'd note it has SGD2 billion price of pipeline from its Sponsor, CapitaLand Ltd and redevelopment opportunities worth SGD360 million. Which makes Ascendas' growth predictable.

Ascendas' balance sheet remained very healthy, with a low gearing ratio of 35%. In my opinion, Ascendas has plenty of firepower to buy more properties. It may borrow debt safely, and cheaply because of the REIT's very strong credit quality.

The biggest risk for Ascendas comes from its food and events-related tenants. This is exactly why its logistics & distribution centres, and “high-specification” industrial centres rents suffered.

These tenants were affected by the pandemic, which forced Ascendas to drop its rents to retain these SME tenants.

As mentioned earlier, Ascendas' well-diversified tenants can keep its rental income resilient. Its other segments had positive rental adjustments.

Ascendas REIT currently has a dividend yield of around 4.56%. with a current price/book valuation of around 1.4x, you'd need to pay a slightly higher premium for its overall properties' growth potential.

If you're a dividend investor looking to increase your retirement portfolio, perhaps Ascendas REIT may be worth a buy.

Sometimes, investing could be simple.

Best Singapore REIT No. 3 – Mapletree Industrial Trust

Ticker: ME8U.SI

Market Cap: SGD6.9 billion

Forward Dividend Yield: 4.05%

Maple Industrial Trust is aware of the potential of the “new-age” digital economy.

And they're preparing for it.

Its surprise move to buy 14 data centres in the US fit well into owning buildings for knowledge-intensive sectors.

And their data centres are almost fully occupied.

Today, Mapletree Industrial owns 84 industrial properties in Singapore and 27 properties in the US.

More than half of these buildings are specially designed for its 2,000 over tenants needing huge technology infrastructure – including the big companies like Hewlett-Packard, AT&T, ThermoFisher Scientific and ST Telemedia.

More people and firms are consuming more and more data. Be it moving into cloud or streaming videos. Mapletree Industrial may be the landlord many technology-savvy tenants like telecommunications and internet companies goes to. And it's also in line with the global shift toward adopting a “work-from-home” structure.

In my opinion, there's strong demand for reliable, specialized buildings in developed countries.

And its numbers are showing.

While Mapletree Industrial's 1HYFY20/21 gross rental income remained flat during the pandemic, its total distribution for 1HFY20/21 rose 14% to SGD144 million, compared to last year.

Similarly, it maintained its abundant free income (FCF) of SGD104 million during the same period. Actually, its FCF continuously grew from SGD132 million in FY2011 and most doubled to SGD287 million as of March 2021.

Now, since its listing in 2010, Mapletree Industrial steadily grew its distribution per unit (DPU) from 3.45 cents to 12.24 cents during its latest FY19/20. Distribution per unit is what unitholders could collect as dividends.

So far, its stock performance has rewarded unitholders well.

Mapletree Industrial's Stock Performance At Top Speed

In fact, for me, you're sitting on the best performing Singapore REIT, if you would bought Mapletree Industrial since IPO. Its stock made its unitholders close to 15% annual returns on their capital, including dividends (by Dec 2021).

You see, the REIT has a knack for picking solid, high quality assets.

And these assets have turned out to be provide a stable, growing type of income for its unitholders.

With the massive rise of traffic data, income growth will come from both its data centres and “hi-tech” buildings.

Mapletree Industrial's balance sheet is robust.

Its gearing ratio is around 38%. This gives the REIT plenty of room to grow. What's even better is this. Mapletree Industrial gets to buy all of the good properties from its strong sponsor, Mapletree Investments.

But the largest problem Mapletree Industrial is facing now, like Ascendas REIT, is its large SME tenant base. 40% of their portfolio are SME tenants, and many have suffered during the pandemic crisis.

So far, Mapletree Industrial could control its rental arrears to around 1.4% of its past Twelve months gross rental income. And 90% of their tenants have resumed operations following the Circuit Breaker (7 Apr to 1 Jun 2021) period.

Today, Mapletree Industrial has a current dividend yield of around 4.05%.

And if you're a dividend investor looking to build your retirement portfolio, perhaps this really is one stable industrial REIT worth a buy.

Sometimes, investing can be simple.

Best Singapore REIT No. 4 – Mapletree Logistics Trust

Ticker: M44U.SI

Market Cap: SGD7.9 billion

Forward Dividend Yield: 5.47%

When you buy “stuff” online, it takes a couple of days, or weeks for that items to reach your home.

And big e-commerce companies like Lazada, Shopee, or even Watsons first need to place the products in warehouses, before it gets delivered to you.

You see, Mapletree Logistics Trust accounts for taking care of all the different types of daily essential products – like food, drinks and healthcare products before it gets sent to the end customers.

And Mapletree Logistics manages these warehouses in certain of the 146 properties it owns across Asia. Near to 700 of their tenants are mainly in consumer-related sectors, selling daily essentials.

That's why there's a huge need to store each one of these items.

Mapletree Logistics Riding On The E-Commerce Wave

With the rising trend of e-commerce, especially throughout the pandemic crisis, it's crucial Mapletree Logistics continues to provide their tenants using the best logistics facilities.

Mapletree Logistics' 1HFY20/21 gross rental income grew 9.4% to SGD264 million, compared to a year ago. Its total distribution to unitholders grew 6% to SGD156 million during the same period. And this was because of higher rent adjustments from many of its properties.

Mapletree Logistics Trust continues to be well managed. It could grow its distributions or net earnings from SGD10 million in FY2005 to SGD302 million by FY2021. Its free cash flow continues to be massive, hitting SGD370 million as of the latest financial year results.

This is largely due to its high quality properties and also the ability to have cheap borrowing costs.

And management is happy to maintain its gearing ratio – which is 39.5%. This means they can continue to grow more properties before they hit the 50% gearing limit set through the MAS.

One major risk is Mapletree Logistics' largest tenant – CWT Group, which remains its largest Singapore tenant, at 8.6% of the REIT's gross rental income.

You see, CWT Group defaulted on its loans from banks early last year. But, so far, the company still has committed to pay rent to Mapletree Logistics.

With a diversified portfolio of properties and tenants, even when CWT Group decides to pull out, Mapletree Logistics should have no trouble finding new tenants.

If you are a dividend investor looking to build your retirement portfolio, perhaps this really is one stable industrial REIT worth a buy.

Sometimes, investing can be simple.

Best Singapore REIT No. 5 – Ascott Residence Trust

Ticker: HMN.SI

Market Cap: SGD3 billion

Forward Dividend Yield: 5.33%

Ascott Residence Trust is focused on serviced residences, hotels, business hotels and rental housing. Temporary or long haul stay.

And its properties can be found across key, developed markets, including China, Japan, UK and the US.

Following its merger with Ascendas Hospitality Rely upon December 2021, Ascott's portfolio is worth more than SGD7 billion, with 88 properties more than 16,000 units across 15 countries worldwide – including China, Japan, UK and also the US.

While the pandemic has put all travels to a stop, Ascott Residence's long-term outlook is still very bright.

Ascott Residence Positioned For any Major Travel Rebound

You see, travel demand can never go away. Think about how globalized today's world is.

And hotel giant Marriott is aware of this. It recently announced plans to open 40 to 50 new hotels in Asia and another 100 next year as it expects travel to recover gradually.

You see, the concern is really not the lack of demand for travel in the long run, but the severe cash crunch managed by these REITs.

Even though Ascott Residence suffered a huge drop in gross rental income, its master lease and management contracts have continued to support REIT through the pandemic crisis. These contracts provide a very steady, 50% of the REIT's gross rental income.

Its budget is strong. Ascott Residence recently refinanced all of its debt in 2021, and has maintained a very low borrowing price of 1.8% per year.

Ascott Residence knows her money – with SGD305 million in cash, and SGD550 million of bank credit facilities, to become drawn anytime.

The REIT has a very low gearing ratio of 34.6%, meaning still it has a lot of room for growth too.

If you are a contrarian income investor looking to bet on the huge rebound in travel, perhaps Ascott Residence is one stock you want to be looking at.

Sometimes, investing can be simple.

Best Singapore REIT No. 6 – Frasers Centrepoint Trust

Ticker: J69U.SI

Market Cap: SGD3.9 billion

Forward Dividend Yield: 5.15%

You'd probably know most of the retail malls were wrecked throughout the pandemic crisis.

But here's in which the real difference lies for Frasers Centrepoint Trust.

The truth is, the ones getting crushed by the pandemic are the malls found in the city centre.

Why? Because, for me, they're usually made up of the office crowd and tourists. Which are in possession of mostly disappeared.

But, demand for retail “heartland” shopping still exists even during the pandemic. And Frasers Centrepoint owns all these “heartland” malls.

I'll explain.

Frasers Centrepoint Is A Heartland Mall Dominator

You see, most of the REIT's malls are well located in Singapore's suburban areas. Where it captures the neighborhood residential population.

When the Singapore government announced Phase 2 of Circuit Breaker, many shoppers actually, returned to these heartland malls.

And these malls have stabilized to 60% to 70% of the pre-pandemic level.

Think about it. If you're still working from home, you want to quickly head to a nearby place to grab food or buy any last minute “daily essentials”. Or if you'd want to get out for a walk, the most convenient spot to go to is your local heartland mall.

I know Frasers Centrepoint's latest 2H2021 (Apr to Sep) results were poor. Gross rental income and net earnings were down 32.5% and 61% every year respectively. But I'd say, Frasers Centrepoint is suffering temporary pain.

Its mall occupancy rates are still around 95%.

And this is important here. Because, what these retail malls lack isn't shoppers demand, but the ability to ride through a crisis.

Now, Frasers Centrepoint has a very strong balance sheet. It still maintains a high quality “investment grade” credit rating during the pandemic. Which means it can refinance and borrow debt in a cheap cost.

Even better, it's important have a high interest coverage ratio of 5x.

You see, its recent acquisition of the remaining 63.1% of AsiaRetail Fund is the right move for this heartland dominator. Frasers Centrepoint is eventually going to capture the returning wave of shoppers.

AsiaRetail Fund currently owns five Singapore heartland malls – Tiong Bahru Plaza, White Sands, Hougang Mall, Century Square and Tampines 1. All located close to the MRT station and command high visitors.

And these malls are in places that there are limited or no big competing shopping malls around.

This means, in the long run, Frasers Centrepoint reaches enjoy heartland dominance.

Sometimes, investing can be simple.

Best Singapore REIT No. 7 – Keppel DC REIT

Ticker: AJBU.SI

Market Cap: SGD4.56 billion

Forward Dividend Yield: 2.90%

Keppel DC REIT is a specialized SGD4.8 billion real estate investment trust.

Unlike the other Singapore REITs, Keppel DC may be the only “pure-play” data centre REIT to become listed since 2021.

Today, Keppel DC has 18 data centres, mostly in Asia. 6 of its data centres are in Singapore.

Now, data centres are huge, dedicated spaces for high-powered computers. These systems run massive amounts of data every second – from streaming videos to surfing your social networking.

And digital content is growing.

That's why most of its tenants are internet companies, telecom operators and IT services.

Because there's so much demand for data traffic now, tenants need to make sure these spaces have specialized, reliable equipment like cooling systems and infrastructure to make sure nothing goes wrong.

You see, Keppel DC knows it's going to benefit from the massive growth in the new digital economy. People are entering cloud adoption, artificial intelligence, 5G advances, and also the “Internet of Things”.

In fact, in my opinion, all of these are expected to grow at least double-digits over the next 10 years.

According to management, data centre spending in Asia Pacific is anticipated to exceed US$30 billion by 2023. That's going to account more than 30% of the global market.

Keppel DC Growing At Breakneck Speed

So far, digital tailwind has rewarded the REIT very well. In 3Q2021, gross rental income exploded 46% annually to SGD67.7 million. From Jan till Sep 2021, Keppel DC has collected SGD192 million of gross rental income. That's up an enormous 35% year over year.

Since its IPO, Keppel DC more than tripled its free cash flow from SGD34 million to SGD113 million just this past year. This allowed it to reward growing dividends to its unitholders year after year.

Now, 70% of Keppel DC's gross rental income has a shorter, 3 years lease. This provides Keppel DC more room to regulate for higher rents to capture the growing demands for data centres.

Even using its huge growth, Keppel DC keeps a healthy financial position. Even banks know of its very high quality assets – and are willing to lend them at a very low borrowing cost 1.6% each year.

This is what makes Keppel DC maintain a high interest coverage ratio of 13x.

Since its gearing ratio is only at 35%, it has much room to develop its acquisitions.

In fact, it recently completed its acquisition at Keppel DC Dublin 1 and Kelsterbach Data Centre in Germany in March and could 2021 earlier this year.

Both properties command a high occupancy rate of 81% and 100% respectively.

One key risk for Keppel DC may be the growing competition with other data centre providers globally.

Management continues to be very careful with acquisitions.

If the thing is, Keppel DC's properties are all fully occupied, or undergoing some form of renovation to improve its occupancy rate. Only its Basis Bay Data Centre includes a low occupancy rate of 63%.

But, so far that's a tiny contribution to its overall rental income.

Sometimes, investing could be simple.

Best Singapore REIT No. 8 – Parkway Life REIT

Ticker: C2PU.SI

Market Cap: SGD2.34 billion

Forward Dividend Yield: 3.62%

Developed countries often face one big, common problem.

An aging population.

You see, Japan has got the highest old-age dependency ratio of OECD countries. 1 in 3 Japanese is going to be over 65 years old by 2050. This means the country has more old people than children who can reasonably support the country later on.

And the government is worried.

This means healthcare cost is going up and it's critical to provide a good place to take care of the elderly.

And that's why Parkway Life REIT or PLife is the REIT to put itself in this market. You see, it's very diversified portfolio of 53 properties owns the best nursing homes in Japan.

Though it's a much smaller REIT than the other Singapore REITs, it's, in my opinion, the best of the best healthcare REIT.

Healthcare Investing Is A Solid Wealth Defense

PLife owns 49 properties across Japan, that are well-located in the dense, residential districts of big cities. All of its properties are fully leased to numerous nursing home operators, with the big operators contributing more than 50% of its Japan nursing home rental income.

These are long-term leases expiring in 11 years. And many of its properties have a yearly rent review.

In Singapore, PLife also owns some world-class local nursing homes – Mount Elizabeth Hospital, Gleneagles Hospital and Parkway East Hospital.

Pandemic or otherwise, even in Singapore, the demand for healthcare is getting important. Very rich people would pay to fly here to Singapore to obtain their health treated in one of those hospitals.

Now, these hospitals are master leased to IHH Group, Asia's largest private healthcare group indexed by both Malaysia and Singapore.

And they're very profitable in South East Asia, having been owned by Japan's 2nd largest trading company, Mitsui & Co, and the Government of Malaysia.

Gross rental income is split equally between its Singapore and Japan assets.

You'd say both Singapore and Japan would be the twin income engines for that REIT. Its latest 3Q2021 results have been resilient, growing its year-to-date gross rental income to SGD90 million.

While it's distributable income to unitholders grew 3.8% to SGD61 million and seven.4% to SGD21 million.

PLife's properties give a very predictable form of income. Free cash flow has been stable, growing from SGD65 million this year to SGD80 million in 2021.

Since its IPO in FY2007, it grew its distribution per unit (DPU) from 6.32 cents to 13.19 cents in FY2021.

This gives income investors a really stable form of dividend income.

And if you would held PLife since its IPO, you'd made an annual total return of close to 11%, including dividends. Making it among the best performing Singapore REITs (as at Dec 2021).

Balance sheet is strong. Its gearing is at a healthy 38.6%, while its interest coverage ratio is 17x. This is because its Japanese properties can borrow at very cheap cost, in Japanese Yen.

While its key growth financial markets are in Singapore and Japan, PLife is also looking beyond other developed markets including Australia, Europe and also the United Kingdom.

Sometimes, investing can be simple.

Conclusion – Your 8 Best Singapore REITs

You know, this list was originally a “10 Best Singapore REITs” list. But researching on 8 REIT alone could be darn tiring.

Anyway, I still have two more REITs I like to talk about. But, I'll keep it for later next time. Need a break.

All these 8 Singapore REITs are a great way for you to get started, especially if you're a dividend investor looking to increase your wealth in retirement safely.