5 Singapore REITs with Strong Sponsors and Gearing Levels Below 40%

When it comes to the REIT sector, it’s important to select REITs with strong attributes.

The current environment of higher interest rates and elevated inflation is putting pressure on the sector.

Hence, income investors should look for REITs with strong sponsors and reasonable gearing levels that can tide them through these challenges.

Here are five Singapore REITs with the above characteristics that you can consider for your buy watchlist.

Mapletree Industrial Trust (SGX: ME8U)

Mapletree Industrial Trust, or MIT, is an industrial REIT with a portfolio of 160 properties spread across Singapore (83), the US (56) and Japan (1).

The total assets under management (AUM) stood at S$9 billion as of 30 June 2024.

MIT is supported by a strong sponsor in Mapletree Investments Pte Ltd, which owns and manages S$77.5 billion of properties as of 31 March 2024.

The REIT reported a commendable set of earnings for the first quarter of fiscal 2025 (1Q FY2025) ending 30 June 2024.

Revenue rose 2.7% year on year to S$175.3 million with contributions from the newly-acquired Osaka data centre along with lease additions and renewals.

Net property income (NPI) inched up 1.3% year on year to S$132.5 million.

Distribution per unit (DPU) improved by 1.2% year on year to S$0.0343.

MIT’s aggregate leverage stood at 39.1% which gives the REIT ample room for taking on more debt to finance acquisitions.

The industrial REIT also sports a healthy interest coverage ratio (ICR) of 4.7 times and has 82.1% of its loans pegged to fixed rates.

Parkway Life REIT (SGX: C2PU)

Parkway Life REIT, or PLife REIT, is a healthcare REIT with a portfolio of 63 properties that includes three hospitals in Singapore, 59 nursing homes in Japan, and strata-titled lots and units in a specialist clinic in Malaysia.

PLife REIT is anchored by a reputable sponsor in IHH Healthcare Berhad (SGX: Q0F) which owns hospitals and clinics in Singapore, Turkey, and Malaysia.

The healthcare REIT reported a mixed set of results for the first half of 2024 (1H 2024).

Gross revenue dipped by 2.7% year on year to S$72.4 million with NPI falling by 2.5% year on year to S$68.3 million.

DPU, however, improved by 3.5% year on year to S$0.0754.

The fall in revenue and NPI was attributed mainly to the depreciation of the Japanese Yen against the Singapore Dollar.

PLife REIT maintained a low gearing of just 35.3% along with a healthy ICR of 10.6 times.

Its cost of debt remained very low at only 1.35% with 90% of its interest rate exposure hedged to fixed rates.

CapitaLand Ascendas REIT (SGX: A17U)

CapitaLand Ascendas REIT, or CLAR, is an industrial REIT with 229 properties located in Singapore, the US, the UK, Europe, and Australia.

The REIT’s assets under management stood at S$16.9 billion as of 30 June 2024.

CLAR has a strong sponsor in CapitaLand Investment Limited (SGX: 9CI), or CLI.

CLI is a global real estate manager with S$134 billion of assets under management and S$100 billion of funds under management as of 31 March 2024.

Like PLife REIT, CLAR also delivered a mixed performance for 1H 2024.

Gross revenue rose 7.2% year on year to S$770.1 million, contributed by acquisitions and newly completed properties in 2023.

NPI increased by 3.9% year on year to S$528.4 million.

DPU, however, dipped by 2.5% year on year to S$0.07524 because of a larger base of units.

Despite the DPU dip, CLAR maintained a high portfolio occupancy of 93.1% and also recorded a positive rental reversion of 13.4%.

Singapore’s oldest industrial REIT had an aggregate leverage of 37.8% along with an ICR of 3.7 times.

Frasers Centrepoint Trust (SGX: J69U)

Frasers Centrepoint Trust, or FCT, is a retail REIT with a portfolio of nine suburban retail malls and an office building.

The assets under management totalled around S$7.1 billion as of 30 June 2024.

FCT has a strong sponsor in Frasers Property Limited (SGX: TQ5), a developer and manager of properties with total assets under management of S$40.1 billion as of 31 March 2024.

The retail REIT reported an encouraging business update for the third quarter of fiscal 2024 (3Q FY2024) ending 30 June 2024.

Retail committed occupancy stayed high at 99.7% for the quarter with shopper traffic and tenant sales both logging year-on-year increases.

FCT’s gearing stood at 39.1% with an ICR of 3.2 times. Around two-thirds of the REIT’s loans are pegged to fixed rates.

The retail REIT announced that its Tampines 1 Mall asset enhancement initiative (AEI) is slated for completion in September 2024 and will bring in a projected return on investment exceeding 8%.

CapitaLand Ascott Trust (SGX: HMN)

CapitaLand Ascott Trust, or CLAS, is a hospitality trust with 102 properties with more than 18,000 units spread across 45 cities in 16 countries.

The total assets under management stood at S$8.5 billion as of 30 June 2024.

Like CLAR, CLAS also has a strong sponsor in CLI that it can rely on to lower its borrowing costs and provide a steady pipeline of assets for acquisition.

CLAS reported a mixed set of earnings for 1H 2024 with revenue rising 11% year on year to S$386.4 million.

Distribution per stapled security, however, dipped by 8% year on year to S$0.0255.

The hospitality trust had a gearing of 37.2% along with an ICR of 3.7 times and a low effective cost of borrowing at 3%.

CLAS is enhancing its portfolio with new assets such as turnkey acquisitions and developments such as a new rental housing property in Fukuoka, Japan.

Somerset Liang Court in Singapore is being redeveloped into a 192-unit serviced residence and is slated to be completed in 2026.

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Disclosure: Royston Yang owns shares of Mapletree Industrial Trust.