12 January 2012

Singapore REITS Index has firmed 2.8% in early 2012

• As of the 11 January, the STI had risen 3.8% in the 2012 year-to-date while the S-REITs Index had firmed 2.7%.
  
• In 2011, 17 out of 22 S-REITs outperformed the Straits Times Index (STI). Over the course of 2011, 21 of these S-REITs provided an average dividend yield of 6.0%, ranging from K-REIT’s 3.4% to First REIT’s 9.3%.
  
• The minimum investment per lot for S-REITs, based on 10 January 2012 prices, range from as low as $138 for Saizen REIT to $3,920 for Fortune REIT.

Singapore Exchange (SGX) offers comprehensive market coverage of the Singapore property market through 22 Singapore-listed Real Estate Investment Trusts (S-REITs). Over the first seven trading sessions of 2012, the FTSE ST Real Estate Investment Trust Index has firmed 2.7%.

As of Tuesday 10 January,  REIT performances in 2012 have ranged from Ascendas REIT gaining 6.6% to Parkway Life declining 2.0%. Ascendas REIT is a property trust which owns and invests in a diverse, income producing portfolio of business parks, light industrial, high-tech industrial and logistic properties in Singapore. Parkway Life REIT, invests into healthcare related real estate assets.

For the year 2011, 17 out of 22 S-REITs outperformed the Straits Times Index (STI) which declined 17%.  In terms of price performance in 2011, the Parkway Life REIT was the top price performing REIT in 2011 as its price was up 8.5%. Taking into account price AND dividends, First REIT provided the highest total return of 16.3% in 2011.

The classes of REIT properties can be divided into office, retail, office/retail hybrids, industrial, healthcare, hospitality and residential. The objective of an S-REIT is to raise capital to invest in real estate asset, allowing investors to be "property owners" without those occasional burdening requirements of renovation, maintenance, repairs and security.

REITs also provide a potentially more convenient way of property investment for small investors. The minimum investment per lot for S-REITs, based on 10 January 2012 prices, range from as low as $138 for Saizen REIT to $3,920 for Fortune REIT.

The table below lists the 22 S-REITs available on SGX, across the various sectors of properties ranked according to their 2012 performance as of Tuesday 10 January. The table also includes the total return of these REITs in 2011, which consists of both price returns and dividend distribution made.

Source: Bloomberg, 11 January 2012

REITs provide regular cash flows for investors in the form of dividends and some of the REITs provide higher annual yields than the current deposit rates. Aside from the MapleTree Commercial Trust, which had an Initial Public Offering in April 2011, the S-REITs, offered an average dividend yield of 6.0% in 2011 ranging from K-REIT’s 3.4% to First REIT’s 9.3%.

As a summary, some of the key reasons for having REITs as part of an investment portfolio are highlighted as follow:

• Portfolio Diversification
  REITs typically own multi-property portfolios with diversified tenant pools, which reduce the risks of reliance on a single property and tenant in the case of directly owning a real estate asset.
  
• Income Distribution
  REITs normally have regular cash flows since in most cases, most of the revenues are derived from rental payments under contractually-binding lease agreements with specific tenure.
  
• Participation in the Property Market
  Most REITs are structured around large properties. With REITs, an investor can own stakes in such properties.
  
• Professional Management
  REITs allow investors the opportunity to buy into properties managed by professional property management companies.

The underlying assets of a REIT could include commercial, retail, industrial and residential properties that are located within a specified country or region. Under guidelines issued by the Monetary Authority of Singapore (MAS), a REIT may also invest in listed or unlisted debt securities and listed shares of or issued by local or foreign non-property companies, securities issued on behalf of the Singapore government or foreign governments or by a supranational agency or by a Singapore statutory board, or cash and cash equivalent items. The majority of a REIT’s assets must, however, be made up of real estate or real estate-related assets. The Property Fund Guidelines can be found in the Code on Collective Investment Schemes issued by MAS.

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www.sgx.com/reits