In the third quarter of 2023, the Straits Times Index (STI) generated a 2.1 per cent total return, bringing its nine-month total return to 3.3 per cent. During the quarter, the STI marginally outpaced the FTSE Asean Extended 60 Index and FTSE Asia Pacific Index, which recorded total returns of 1.1 per cent and declines of 1.1 per cent, respectively.

Energy and banking sectors led the global stock market in Q3 2023 as oil gained 27 per cent to US$95 a barrel, while expectations were anchored to the Federal Reserve keeping rates higher for longer in 2024. Similarly, locally and within the STI, the trio of DBS : D05 0%, OCBC : O39 0%and UOB : U11 0%averaged 6.9 per cent total returns in the quarter.

On the other side of the “higher-for-longer” Fed funds rate outlook, the iEdge S-Reit Index declined 4.2 per cent in total return in Q3 2023.

In the month of September, the S-Reits benchmark declined 3.4 per cent in total return. However, three S-Reits that bucked the trend were Frasers Hospitality Trust (FHT) : ACV 0% (6.3 per cent total return in the month), Aims Apac Reit (AAReit) : O5RU 0% (3.2 per cent) and Sabana Industrial Reit (Sabana Reit) : M1GU 0% (2.6 per cent).

FHT has a total portfolio value of S$1.9 billion across 14 hospitality properties in six cities, with Singapore being the largest contributor to its portfolio value and net property income (NPI) at 42 per cent and 35 per cent, respectively. In the first half of FY2023, FHT’s gross revenue and NPI improved 41.1 per cent and 42.9 per cent year on year, respectively, due to an improved operating environment with relaxed travel restrictions, and both metrics have since reached close to 92 per cent of pre-Covid levels.

FHT noted that its Singapore portfolio recorded positive year-on-year improvements in all operating metrics as Singapore’s tourism sector continued its recovery, coupled with the return of marquee events such as Food&HotelAsia, International Maritime Defence Exhibition and Conference Asia and CommunicAsia. FHT reported 79.7 per cent year-on-year growth in both distributable income and distribution per stapled security in H1 FY23.

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AAReit’s portfolio consists of 28 industrial properties with a combined portfolio value of around S$2 billion. AAReit’s sponsor is Sydney-headquartered Aims Financial Group, and the Reit has 64.1 per cent of its portfolio in Singapore and 35.9 per cent in Australia. AAReit reported that distributions to unitholders for Q1 FY24 grew 5.1 per cent year on year, driven by double-digit rental reversion and higher occupancy rates despite market headwinds, and continues to see sustained demand for high-quality assets from advanced manufacturing and logistics sectors. AAReit’s portfolio occupancy increased to 98.1 per cent, and leases renewed during the quarter achieved positive rental reversion of 38 per cent, largely due to strong demand from third-party logistics providers.

Sabana Reit has a total portfolio value of S$887.5 million across 18 industrial properties in Singapore. Gross revenue and NPI for H1 2023 grew 23.2 per cent and 0.5 per cent year on year, respectively, mainly due to higher occupancy rates which improved to 93.9 per cent – a multi-year high. Sabana Reit reported that it continued to benefit from strong demand for warehouse and logistics properties. Electronics and logistics and supply chain management trade sector tenants were among the fastest growing during H1 2023. Sabana Reit also achieved record rental reversion of 20.1 per cent during the period, with attained tenant retention rate of 84.8 per cent.

The writer is a research analyst at SGX. For more research and information on Singapore’s Reit sector, visit sgx.com/research-education/sectors for the monthly S-Reits & Property Trusts Chartbook.

Source: SGX Research S-Reits & Property Trusts Chartbook.