S-Reits rebound 6% in November

THE iEdge S-Reit Index recovered 5.7 per cent in total returns in November, after a 5.6 per cent decline in October. It outperformed the FTSE EPRA Nareit Developed Index which gained 3.5 per cent during the same period.

Interest rates and economic growth in key Asian markets continued to be key drivers during the month.

On a year-to-date total return basis, S-Reits have seen a 10.9 per cent decline, against the Straits Times Index’s 9.6 per cent gain, while the FTSE EPRA Nareit Developed Index has seen a decline of 21.1 per cent.

Top performing sub-segments within the S-Reits sector in November were data centre, diversified and industrial S-Reits which saw average total returns of 12 per cent, 8 per cent and 4 per cent respectively.

S-Reits within the healthcare segment were the only ones which averaged negative total returns.

During the month of November, retail investors have been a key driver in the sector’s fund inflow activities, accumulating net retail inflows of S$54 million.

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Institutional investors on the other hand, net sold S$95.6 million for the sector.

In terms of sub-segments, retail flows were driven by inflows seen in office (+S$31.1 million), industrial (+S$10.8 million) and healthcare S-Reits (+S$4.6 million).

Diversified (+S$12.3 million) and data centre S-Reits (+S$5.2 million) were the only sub-segments that received net institutional inflows.

Six S-Reits recorded double-digit total returns last month: Digital Core Reit : DCRU 0%(+18.1 per cent), CapitaLand China Trust : AU8U 0% (+16.5 per cent), Daiwa House Logistics Trust : DHLU 0% (+16.1 per cent), OUE Commercial Reit : TS0U 0% (+12.3 per cent), SPH Reit : SK6U 0% (+10.4 per cent) and CapitaLand Integrated Commercial Trust : C38U 0% (+10.1 per cent).

Digital Core Reit (DCReit) has just updated that it will proceed with the fully debt-funded acquisition of a 25 per cent interest in a freehold data centre in Frankfurt, Germany for approximately US$140 million. The transaction is expected to be distribution per unit (DPU) accretive by 2 per cent on a pro forma basis and marks Digital Core Reit’s maiden acquisition since listing in 2021.

In its latest business update, DCReit reported 9M 2022 net property income of US$53 million, 5.7 per cent above the IPO forecast.

However, distributable income came in at US$34 million, missing the forecast by 3.4 per cent.

The Reit noted that while the business is not completely immune to broader macroeconomic trends, data centre demand is durable. It believes in the strong support from its sponsor, Digital Realty, and that it can afford to be patient while waiting for an opportune time to execute its next phase of growth plans. SGX RESEARCH

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.