5 top office Reits deliver minus 3.2% return in 2018

Singapore

THE five largest office real estate investment trusts (Reits) on the local bourse with assets in Singapore have brought home an average negative total return of 3.2 per cent year-to-date as of May 3.

This brings their one-year and three-year total returns to 14.3 per cent and 21.8 per cent respectively. They maintain a 5.6 per cent average distribution yield.

The four that have reported their results for the first three months of 2018 averaged a distribution per unit (DPU) of 2.09 Singapore cents, down an average 4.5 per cent from the year-ago period.

This was according to data compiled by investor portal, SGX My Gateway and released on May 4.

Out of the four trusts that posted results last month, Suntec Reit recorded the highest DPU of 2.43 Singapore cents and was the only one whose DPU gained on a year-on-year basis, inching up 0.3 per cent.

Frasers Commercial Trust's 2.40 Singapore cents in DPU was down 4.4 per cent from the same period a year ago.

CapitaLand Commercial Trust (CCT) saw DPU fall 11.7 per cent to 2.12 Singapore cents, while Keppel Reit's DPU slipped 2.1 per cent to 1.42 Singapore cents.

These trusts averaged a 3.4 per cent year-on-year decline in net property income to S$48.5 million. Their gross revenue fell an average 2.0 per cent year-on-year to S$65.0 million.

OUE Commercial Reit, the fifth-largest office Reit with assets here, is scheduled to release its results for the quarter ended March on May 10.

All together, the five office Reits have a combined market capitalisation of S$18 billion. Their commercial assets are located both domestically and overseas. For instance, CCT owns a 11 per cent stake in MRCB-Quill REIT, whose portfolio comprises 11 commercial properties across Malaysia, on top of its 10 office assets in Singapore. (see amendment note)

SGX noted the outlook for the office sector appears to be improving, according to those counters that have posted results.

Keppel Reit cited CBRE data that showed better office occupancy levels of 94.1 per cent in the Singapore core Central Business District (CBD) for the first quarter, from 93.8 per cent in the fourth quarter of 2017.

CCT noted that market rents are expected to grow steadily over the next few years.

This stems from higher committed occupancies in newly completed office buildings and limited new supply in the CBD between 2018 and 2020.

CCT said a potential rise in market rents could "narrow the gap between committed and expiring rents for its leases due for renewal in 2018".

Amendment note: A previous version of this story incorrectly said that CCT owns a 17.7 per cent stake in MRCB-Quill REIT, based on the SGX market report. Its stake is in fact 11 per cent. The article above has been revised to reflect this.