Global opportunities drive S-Reits growth in 2020

REAL Estate Investment Trusts or Reits are investment trusts that invest in a diversified portfolio of professionally managed income generating assets. These include offices, industrial parks, shopping malls, hotels, and specialised properties including healthcare and data centres.

Singapore's Reit & Property Trusts (S-Reits) sector is Asia ex-Japan's largest Reits cluster with 43 trusts and a combined market capitalisation exceeding S$100 billion.

S-Reits have significant representation in the Singapore market, making up over 25 per cent of SGX's daily turnover and about 12 per cent of Singapore's overall listed stocks by market capitalisation. On a global front, 20 S-Reits are included in the FTSE EPRA Nareit Global Real Estate Index Series, a widely followed global benchmark with an estimated US$340 billion of assets under management actively benchmarked or passively tracking the indices.

The sector has evolved over the last 18 years since the listing of CapitaLand Mall Trust in 2002 where it was predominantly a domestic Reit market.

With now over 80 per cent of trusts owning and managing overseas assets from across Asia Pacific, the United States and Europe, S-Reits are now one of the most international Reit markets with a well-supported regulatory framework.

Global Reit markets have not been spared the sell-off in early 2020 due to the Covid-19 pandemic.

S-Reits declined over 20 per cent while global Reits declined almost 40 per cent in comparison.

The diversified nature of S-Reits in terms of sub-sectors played a part in its resilience during the sell-down. Industrial, data centre and healthcare asset Reits have been beneficiaries of the current environment.

The 5 best performing Reits within the iEdge S-Reit Index in the YTD are Keppel DC Reit (+36.4 per cent total returns), Frasers Logistics & Industrial Trust (+23.1 per cent), ParkwayLife Reit (+19.8 per cent), Mapletree Logistics Trust (+19.3 per cent), and Mapletree Industrial Trust (+14.4 per cent). Total institutional fund inflows into these five trusts stood at S$134 million in the year to date.

New regulatory measures to support S-Reits were also announced in April 2020 which include extension of timeline for S-Reits to distribute at least 90 per cent of their taxable income from three months to 12 months (after the end of FY2020) to qualify for tax transparency, increasing S-Reits' leverage limit from 45 per cent to 50 per cent and deferment of implementation of a new minimum interest coverage ratio requirement to Jan 1, 2022.

S-Reits have since rebounded and generated -3.1 per cent YTD total returns, against global Reits' average of -9.3 per cent (as at Dec 24, 2020).

S-Reits have a diverse base of investors ranging from institutional, private wealth and retail and have increasingly been a part of investor portfolios.

At an average distribution yield of 6.4 per cent, S-Reits have consistently been one of the highest yielding Reit markets for income-focused investors. SGX RESEARCH

• 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, data as at Nov 30, 2020.