Singapore REITs Monthly Update (July 7th, 2024)

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Technical Analysis of FTSE ST REIT Index (FSTAS351020)

FTSE ST Real Estate Investment Trusts (FTSE ST REIT Index) increased from 640.40 to 630.80 (-1.50%) compared to last month’s update. The REIT Index is currently forming a big descending triangle and seems like forming a base close to 620-630 support zone.

  • Short-term direction: Down
  • Medium-term direction: Sideways
  • Long-term direction: Down
  • Immediate Support at 623
  • Immediate Resistance at 20D SMA, followed by 50D SMA

 

FTSE REIT Index Chart (2 years)

 

Previous chart on FTSE ST REIT index can be found in the last post: Singapore REIT Fundamental Comparison Table on June 2nd, 2024.

 

Fundamental Analysis of 38 Singapore REITs

The following is the compilation of 38 Singapore REITs with colour-coding of the Distribution Yield, Gearing Ratio and Price to NAV Ratio.

  • The Financial Ratios are based on past data and these are lagging indicators.
  • REITs with yellow highlights have the latest Q1 2024 values.
  • I have introduced weighted average (weighted by market cap) to the financial ratios, in addition to the existing simple average ratios. This is another perspective where smaller market cap REITs do not disproportionately affect the average ratios.

Data from REITsavvy Screener. https://screener.reitsavvy.com/

 

 

 

What does each Column mean?

  • FY DPU: If Green, FY DPU for the recent 4 Quarters is higher than that of the preceding 4 Quarters. If Lower, it is Red.
  • Yield (ttm): Yield, calculated by DPU (trailing twelve months) and Current Price as of July 5th, 2024.
  • Gearing (%): Leverage Ratio.
  • Price/NAV: Price to Book Value. Formula: Current Price over Net Asset Value per Unit.
  • Yield Spread (%): REIT yield (ttm) reference to Gov Bond Yields. REITs are referenced to SG Gov Bond Yield.

As of May 2024, all REITs’ Yield Spread will be referenced to SG Gov Bond Yields, regardless of trading currency.

Price/NAV Ratios Overview

  • Price/NAV decreased to 0.77 (Weighted Average: 0.77)
    • Decreased from 0.78 in June 2024.
    • Singapore Overall REIT sector is undervalued now.
    • Price/NAV increased due to NAV trending downwards from the latest Q4 2023 update.
  • Most overvalued REITs (based on Price/NAV)
    EC World REIT 2.15
    ParkwayLife REIT 1.55
    Keppel DC REIT 1.34
    Mapletree Industrial Tr 1.20
    Capitaland Ascendas REIT 1.16
    AIMS APAC REIT 0.96
    • Only 5 REITs are overvalued now based on Price/NAV value.
  • Most undervalued REITs (based on Price/NAV)
    Prime US REIT 0.19
    Manulife US REIT 0.19
    Keppel Pacific Oak US REIT 0.19
    Lippo Malls Indonesia Retail Trust 0.27
    ARA Hospitality Trust 0.40
    OUE REIT 0.43

Distribution Yields Overview

  • TTM Distribution Yield increased to 8.05%. (Weighted Average increased to 6.63%)    
    • Increased from 7.88% in June 2024. (Weighted Average was 6.51%)
    • 22 of 40 Singapore REITs have ttm distribution yields of above 7%.
    • Do take note that these yield numbers are based on current prices taking into account the delayed distribution/dividend cuts due to COVID-19, and economic recovery.
    • 8 REITs have a ttm yield of over 10%!
  • Highest Distribution Yield REITs (ttm)
    Prime US REIT 23.98
    Keppel Pacific Oak US REIT 18.80
    Elite Commercial REIT 12.86
    United Hampshire REIT 12.13
    ARA Hospitality Trust 12.04
    IREIT Global 11.85

    Reminder that these yield numbers are based on current prices. 

    • Some REITs opted for semi-annual reporting and thus no quarterly DPU was announced.
    • A High Yield should not be the sole ratio to look for when choosing a REIT to invest in.
  • Yield Spread widened to 4.82%. (Weighted Average remained almost the same at 3.93%)     
    • Widened from 4.52% in June 2024. (Weighted Average was 3.92%)
    • From May 2024 onwards, all my yield spread measurements are now in relation to SG Gov Bond Yields, no longer a mix with US Gov Bond Yields.

 

Gearing Ratios Overview

  • Gearing Ratio remained at 39.21%. (Weighted Average: 38.26%)
    • Remained at 39.21% in June 2024. (Weighted Average: 38.25%)  
    • Gearing Ratios are updated quarterly. Therefore there are no gearing ratio updates this month.
    • S-REITs Gearing Ratio has been on a steady uptrend. It was 35.55% in Q4 2019.
  • Highest Gearing Ratio REITs
    EC World REIT 57.2
    Manulife US REIT 56.7
    Prime US REIT 48.1
    ARA Hospitality Trust 44.1
    Lippo Malls Indonesia Retail Trust 43.7
    Keppel Pacific Oak US REIT 43.0

    MUST and EC World REIT’s gearing ratio has exceeded MAS’s gearing limit of 50%. However the aggregate leverage limit is not considered to be breached if exceeding the limit is due to circumstances beyond the control of the REIT Manager.

Market Capitalisation Overview

  • Total Singapore REIT Market Capitalisation decreased by 1.85% to S$84.39 Billion.
    • Decreased from S$85.98 Billion in June 2024.
  • Biggest Market Capitalisation REITs (S$m):
    Capitaland Integrated Commercial Trust 13233.50
    Capitaland Ascendas REIT 11169.00
    Mapletree Pan Asia Commercial Trust 6408.66
    Mapletree Logistics Tr 6392.32
    Mapletree Industrial Tr 5981.85
    Frasers Centrepoint Trust 3701.52

    Mapletree Pan Asia Commercial Trust overtook Mapletree Logistics Trust this month in market cap!

  • Smallest Market Capitalisation REITs (S$m):
    Manulife US REIT 115.92
    Elite Commercial REIT 118.33
    Lippo Malls Indonesia Retail Trust 130.83
    Prime US REIT 134.47
    Keppel Pacific Oak US REIT 138.32
    ARA Hospitality Trust 164.79

Disclaimer: The above table is best used for “screening and shortlisting only”. It is NOT for investing (Buy / Sell) decision. If you want to know more about investing in REITs, scroll down for more information on the REITs courses.

 

Top 20 Best Performers of June 2024

Source: https://screener.reitsavvy.com/

 

 

SG 10 Year Government Bond Yield

  • SG 10 Year: 3.23% (decreased from 3.39%)

 

Summary

The index is currently consolidating within a descending triangle waiting for the breakout with the immediate support zone between 620-630.

S-REIT sector is currently trading close to COVID low, which considered a good entry points again based on the current chart pattern, valuation, DPU yield and projected interest rate movement. Current yield @6.5% with 20-30% upside potential based on fair book valuation.

The cut in US Interest Rate and the drop in US 10 Years Bond Yield would be the key catalysts to kick start the Singapore REIT sectors again. Until that happens, investors need to continue to wait patiently while collecting the dividend. Patience is needed at the moment for REITs investors.

 

US 10 Year Risk Free Rate

 

Kenny Loh is a Wealth Advisory Director and REITs Specialist of Singapore’s top Independent Financial Advisor. He helps clients construct diversified portfolios consisting of different asset classes from REITs, Equities, Bonds, ETFs, Unit Trusts, Private Equity, Alternative Investments, Digital Assets and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Symposium and Invest Fair.  You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement

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Money and Me: Navigating Challenges for Mapletree REITs and REITs related to Changi Business Park

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10 June 2024

Money and Me: Navigating Challenges for Mapletree REITs and REITs related to Changi Business Park

Today, we delve into the outlook for Mapletree REITs amid challenging market conditions and leadership changes. We discuss the recent performance of Mapletree Logistics Trust and Mapletree Panasia Commercial Trust, investors’ punishing responses and recent leadership changes.
Michelle and her guest Kenny Loh also examine the implications of Mapletree Anson’s $775 million sale by MPACT. Then we travel to Singapore’s “CBD of the east” and examine what the emptying of tenants mean for Singapore’s ambitions to become a regional hub for MNC’s and the possible impact of the vacancies at Changi Business Park on S-REITs. Guest: Kenny Loh, REIT Specialist and Independent Financial Advisor.

 

 
 

Note: The above analysis are my own personal views and are NOT buy or sell recommendations. Investors who would like to leverage my extensive research and years of Singapore REIT investing experience can approach me separately for a REIT Portfolio Consultation.

 

Listen to his previous market outlook interviews here:

2024

2023

2022

2021

2020

Kenny Loh is an Associate Wealth Advisory Director and REITs Specialist of Singapore’s top Independent Financial Advisor. He helps clients construct diversified portfolios consisting of different asset classes from REITs, Equities, Bonds, ETFs, Unit Trusts, Private Equity, Alternative Investments, Digital Assets and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Symposium and Invest Fair.  

You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement

Continue ReadingMoney and Me: Navigating Challenges for Mapletree REITs and REITs related to Changi Business Park

REITspots: IREIT Global’s Properties (Overseas Site Visit)

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On the second edition of REITspots, we travel to Barcelona, Spain to visit 2 properties belonging to IREIT Global (SGX: UD1U). This time round, gain an exclusive look inside the 2 properties, Saint Cugat Green and Parc Cugat.

Put on your walking shoes and grab your investment hat, because REITsavvy is taking you on a stroll through the exciting world of REIT properties with our brand-new series: REITspots! Whilst at one of the properties, I got to briefly talk to Charles de Molliens, Vice President Real Estate Private Equity at Tikehau Capital. Throughout this article, you’ll get to know more about the properties and IREIT Global itself.

 

IREIT Global

 
 

 

Source: reitsavvy.com – IREIT Global’s financial ratios

R | S | P | I

 

Overview

IREIT Global owns 2 properties, namely Saint Cugat Green (€44.6 mil valuation) and Parc Cugat (€27.0 mil valuation). This visit was done on a Monday afternoon, therefore there’ll be a good indication of occupancy and ‘liveliness’ of the area. The properties are about 1.5 hours from the Barcelona Airport and about a 30 min drive from the city centre.

Saint Cugat Green (left) and Parc Cugat (right)

Taking public transportation, Parc Cugat is a mere 5 mins’ walk from St Joan Station, which is also a 30 min train ride from the city centre. For Sant Cugat Green, it is a 5 mins’ bus ride (or a 30 mins’ walk) from St Joan Station.

St Joan Station. The business park, where Parc Cugat is in, is visible from the station.

Saint Cugat Green

“Sant Cugat Green is a modern office building in Barcelona with a 5,256 sqm data centre space and a restaurant for internal use by its tenants. The property comprises three basement levels, a ground floor and four upper floors, and 580 parking spaces (of which 30 are for motorbikes). The property has floor plates with more than 3,000 sqm situated around a central atrium and enjoys good natural light throughout the building. Sant Cugat Green is LEED Gold certified.” – IREIT Global’s website.

  • Facade of Sant Cugat Green
  • List of tenants
  • The lobby
  • Entrance to the building. Note the LEED Gold certification
  • 3 of 4 floors of the basement carpark are mostly occupied, suggesting good occupancies

On first glance, this property looks very modern both from the outside and inside. I was only allowed to access the lobby area inside the gated area, as this is a mainly data centre focused building. Data centres are stricter in general due to confidentiality. You may ask, doesn’t IREIT Global specialise in Office properties?

Q: You have acquired Sant Cugat Green not too long ago. Are you looking to diversify and move towards Data Centres?

Charles: Not really. It is only because Sant Cugat Green was formerly a Data Centre operated by Deutsche Bank. After they moved out, we bought the property and have leased it to various companies such as HP. As the building was built back in 1993, we have renovated the building in 2022 and now it is currently tenanted to Oxigent Technologies. Their lease is due to end in 2034.

Parc Cugat

“Parc Cugat is a modern office building situated within a business park in the office market of Sant Cugat del Vallès (Barcelona), which offers various services such as restaurants and hotels, as well as an efficient transport connection to the city of Barcelona. The property is located just 3km from Sant Cugat Green. The building consists of 12,000 sqm of office space, an auditorium with capacity for 200 people and more than 400 parking spaces for cars and motorcycles. With a modern façade and a versatile space distribution, the property comprises four basement levels, a ground floor and four upper floors with more than 2,000 sqm. Parc Cugat is LEED Silver certified.” – IREIT Global’s website.

For Parc Cugat, I was able to gain access and tour the property in depth. This was a very insightful visit of one of IREIT Global’s properties. Enjoy the slideshow.

Parc Cugat is located within a Business Park, Sant Cugat del Vallès

This property is still undergoing minor works, such as the ongoing enhancement of the common terraces. For example, new automatic water pipes are being installed, and flowers and trees have also been ordered.

 

Common Areas

  • Reception and Access Gates
  • The Elevators
  • A corridor to an office
  • Terraces for tenants
  • Terraces for tenants
  • Terraces for tenants
  • Terraces for tenants
  • 200 seater Auditorium
  • 200 seater Auditorium
  • Restaurant for internal use
  • Restaurant for internal use

 

Office Spaces

  • A corridor to an office
  • Untenanted office space
  • Untenanted office space
  • Untenanted office space
  • Sign to let

Occupancy of Parc Cugat is reported to be only 61.1%. Judging by the untenanted office spaces, it is easy to see why. However, one of these office spaces have already a Letter of Intent to be let, although it is still not confirmed.

IREIT Global’s ESG efforts

One notable observation of Parc Cugat that is clearly visible is their intent to meet ESG targets (at least for the environmental aspects). A trip to the rooftop reveals arrays of solar panels, to provide clean solar energy for the office building.

Rooftop

  • Rooftop solar panels
  • View of the business park. On the right you can see ‘6’ buildings, only 3 belong to IREIT Global. (It is only one fully connected building)
  • View of surroundings

 

Bonus: IREIT’s leasing strategy

Charles: Most of IREIT’s tenants (and in Europe) have a mandatory minimum leasing period (i.e. tenants must pay a penalty is they leave early). For example, in Germany, it may be 10 years, while in Spain it can be 4-5 years. 

 

Conclusions

This site visit to IREIT Global’s properties has been eye opening. I got to see first-hand ongoing Asset Enhancement Initiatives (AEIs) of office buildings as well as the initiatives that REITs are taking as part of their ESG Commitment. Lastly, I would like to thank Charles de Molliens, Vice President Real Estate Private Equity at Tikehau Capital for his time.

 

Kenny Loh is a Wealth Advisory Director and REITs Specialist of Singapore’s top Independent Financial Advisor. He helps clients construct diversified portfolios consisting of different asset classes from REITs, Equities, Bonds, ETFs, Unit Trusts, Private Equity, Alternative Investments, Digital Assets and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Symposium and Invest Fair.  You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement

Continue ReadingREITspots: IREIT Global’s Properties (Overseas Site Visit)