RISKS for Singapore's real estate investment trusts (S-Reits) will rise in 2016, said Fitch Ratings in a report on Monday, in view of weak economic fundamentals and new supply that will be added into most sectors.
The ratings agency said it expects S-Reits with stronger balance sheets to become more acquisitive in 2016 as they try to boost earnings growth by capitalising on lower asset valuations. Sector leverage (defined as debt/total assets) is likely to increase in 2016 as a result.
Specifically, Fitch said it expects hospitality S-Reits' earnings to continue declining, but at a slower pace. Meanwhile, pressure on industrial S-Reits' earnings will increase in 2016 due to the weak global economic climate. It added that it expects the strong performance of healthcare S-Reits to continue in 2016, supported by robust demand for their services and an ageing population in Asia.