S-Reits key driver of market turnover in 2019: SGX

Singapore

IT WAS a year of milestones for Singapore real estate investment trusts (S-Reits) as well as stapled and property trusts. Not only did they hit a record in secondary fundraisings and outpace the broader market, they also contributed a quarter of the total day-to-day turnover of Singapore's stock market, despite only making up 12 per cent of the total stock market capitalisation at the end of 2019.

A report by the Singapore Exchange (SGX) on Monday said that the 35 S-Reits, six stapled trusts and two property trusts contributed 24 per cent of the day-to-day turnover of Singapore's stock market, while maintaining a combined market value of S$111.9 billion, out of the total market cap of S$937.8 billion of the total universe at the end of the year.

The 43 trusts also generated average total returns of 23 per cent in 2019, and ended the year with an average 6 per cent distribution yield.

Twenty-five of the 43 trusts (about three in five) outpaced the 9.4 per cent total return of the Straits Times Index (STI). On average, the 43 trusts generated a 23 per cent total return in 2019, while the 39 trusts that were listed for the full duration of the year averaged a 26 per cent total return.

Juxtaposed against global peers, S-Reits were also winners. Global Reits generated a median total return of 21 per cent in 2019. Total returns refer to accumulative returns, assuming that dividends are reinvested into units or shares on the ex-dividend date.

Analysts have pinned the strong performance of Reits - not just in Singapore but globally --to a mixture of reasons ranging from macro uncertainty driving investors to defensive yield instruments, and the US Federal Reserve's surprise turn to a dovish stance in the middle of 2019. In fact, last year, global Reits generated their strongest year of gains in a decade, and one of their five strongest years since 2002.

Within the S-Reit sector, the strongest performers were Keppel DC Reit, Ascendas Hospitality Trust (pre-merger with Ascott Residence Trust), Ascendas India Trust, Mapletree Commercial Trust and Sasseur Reit.

Keppel DC Reit's units surged on several acquisitions made in the year that were accretive to its distribution per unit, while Ascendas India Trust benefited from good results and market optimism about its expansion into modern warehouses which presents a new leg of growth in India for the trust.

Mapletree Commercial Trust's performance was primarily driven by its inclusion in the STI last year and major acquisition of Mapletree Business City II from its sponsor. Sasseur Reit rose on improved rental income and outlet sales, and a promising pipeline of assets for acquisition going forward.

On the secondary fundraising front, of the S$5.92 billion in placements in 2019, the trusts contributed 88 per cent or S$5.22 billion. Much of this was because OUE Commercial Reit contributed S$1.42 billion in relation to its merger with OUE Hospitality Trust.

Excluding the OUE Commercial Reit fundraising, 18 trusts contributed a record S$6.24 billion of the combined S$7.4 billion in placements and rights issues of SGX-listed companies in 2019. Including OUE Commercial Reit's placements, 19 trusts raised S$7.66 billion, of a total of S$8.82 billion in secondary fundraisings in 2019.

The STI now includes five Reits which have a combined index weighting close to 10 per cent. Mapletree Commercial Trust and Mapletree Logistics Trust joined the STI in successive quarterly rebalances in September and December 2019. Four of the five stocks of the STI reserve list are also Reits, namely Suntec Reit, Mapletree Industrial Trust, Keppel Reit and Mapletree North Asia Commercial Trust.

Index inclusion will remain a pursuit of S-Reits, not just on the STI but also the global indices. SGX now lists 26 real estate stocks that are included in the FTSE EPRA/NaReit Global Real Estate Index Series - closely watched indices by institutions - representing 5.5 per cent of of the number of constituents in the index series, and 3 per cent of the index weight.

S-Reits that were added to the FTSE EPRA/NaReit Global Developed Index last year included Keppel DC Reit, Manulife US Reit, Frasers Centrepoint Trust and Frasers Logistics & Industrial Trust, while others that may follow this year, according to market talk, include Ascott Residence Trust, OUE Commercial Reit, and ESR-Reit.