Complete Guide To Start Your REITs Investing Journey In Singapore

REITs, which is short for Real Estate Investment Trusts, are a popular type of investment in Singapore. In fact, it is so popular that Singapore has grown to become the largest REIT market in Asia ex-Japan. With a market capitalisation of nearly $100 billion, there are over 40 REITs and property trusts listed on SGX today.

While many REITs have a local property portfolio, there are also many REITs with both local and/or overseas properties that have also chosen to list in Singapore.

Investors in Singapore are mainly drawn to REIT investments for two reasons.

#1 REITs Are Essentially Property Investments

As Singaporeans, our infatuation with the property market is a given. Till today, local property prices are ticking upward despite the slew of property cooling measures repeatedly announced over more than a decade. In the face of rising inflation and rents, Singapore property prices are also on an upward march.

Sky-high prices mean that investments in individual properties remain out of reach for many ordinary Singaporeans, REITs come into play – allowing ordinary investors to access property investments in smaller investment amounts. REITs also enable local investors to gain exposure to a wide range of properties both in Singapore and other major property markets globally. Unfortunately, one of the sectors that remain elusive in Singapore REITs market is residential properties.

#2 REITs Offer Relatively Stable Dividends.

As an asset class, REITs are mandated to pay out 90% of their earnings as distributions to their unitholders. This is the reason why many REITs pay a relatively high and stable distribution yield. According to SGX, Singapore REITs are currently paying an average of 7.0% per annum – in line with the increase in global interest rates. Such distributions provide passive income for investors, who can choose to reinvest their distributions or to supplement their income.

However, we need to understand that REITs are able to pay out a high distribution yield to its unitholders largely because it is highly leveraged.

What you’ll read in this article:

You First Need A CDP Account
What Are REITs?
7 Types Of REITs Listed In Singapore
How To Start Investing In REITs?
What Are REIT ETFs?
Investing In A Managed REIT Portfolio
Pros And Cons To Investing In REITs VS Properties
Important Questions We Should Ask When We Decide To Invest In REITs

You Need A Brokerage & CDP Account To Start Investing In REITs

Similar to other investments on the Singapore Exchange (SGX), you need to open a stock brokerage and Central Depository (CDP) account before you are able to access the market. To open a brokerage account, you can go to the individual websites of brokerage firms to apply.

If this is the first time you are signing up for a brokerage account, your broker can help in submitting the CDP application form on your behalf, to CDP. This saves you the hassle of having to apply on your own. You can also choose not to open a CDP account, especially if you are investing with an online broker or want to store your investments in a custodial account in the first place. In this case, your stock broker will maintain a CDP sub-account, via a custodial account, for you. Note that you may have to pay some costs for custodial services.

Nevertheless, CDP account opening is available online, so you can also sign up for a CDP Account from the comfort of your home, or by downloading and completing the CDP application form. Once you have submitted the CDP application form and all supporting documents, your CDP application is completed. CDP will notify you with your necessary login information once your application submission is processed.

You can now start investing in REITs and other listed securities.

Read Also: Step-By-Step Guide To Opening A CDP Account In Singapore

What Are REITs?

REITs are listed on the SGX and other stock exchanges, and can be bought and sold in a similar way to regular stocks. REITs pool funds from many investors to purchase a large portfolio of properties. These properties are then leased out to collect rents, which are paid to REIT investors in the form of quarterly or semi-annual distributions.

REIT investors can gain exposure to large and diversified property investments in Singapore and globally with a small investment amount. REITs also take care of the professional property management services to manage the properties, enhance its portfolio and maximise rents. This takes away the daily operational stresses of managing a property if you own it individually.

To be classified as a REIT in Singapore, the property trust has to meet strict regulatory guidelines including paying out more than 90% of its income, maintaining a gearing of less than 50%, and limiting development activities to a maximum of 25% of its portfolio amongst others.

7 Types of REITs Listed In Singapore

Most REITs specialise in specific real estate segments – even though there is a trend of consolidation to form larger REIT entities. There are currently about 41 REITs and property trusts in Singapore, and they typically invest in these seven REIT types:

Read Also: 7 Types of REITS In Singapore, And The Reasons Why People Invest In Them

1. Commercial/Office REITs

No
REITs And Stapled Securities
Country Exposure
Distribution Yield*

1
Elite Commercial REIT
United Kingdom (UK)
13.7%

2
IREIT Global
Germany, Spain, France
9.8%

3
Keppel Pacific Oak US REIT
USA
14.1%

4
Keppel REIT
Singapore; Australia; South Korea; Japan
6.2%

5
Manulife US REIT
USA
N.A.

6
Prime US REIT
USA
N.A.

2. Retail REITs

No
REITs And Stapled Securities
Country Exposure
Distribution Yield*

7
BHG Retail REIT
China
1.6%

8
Dasin Retail Trust
China
N.A.

9
Frasers Centrepoint Trust
Singapore; Malaysia
5.4%

10
Lippo Malls Indonesia Retail Trust
Indonesia
2.4%

11
PARAGON REIT
Singapore; Australia
5.9%

12
Sasseur REIT
China
9.0%

13
Starhill Global REIT
Singapore; Malaysia; Australia; China; Japan
7.2%

14
United Hampshire US REIT
USA
11.1%

3. Industrial REITs

No
REITs And Stapled Securities
Country Exposure
Distribution Yield*

15
AIMS APAC REIT
Singapore; Australia
7.4%

16
CapitaLand Ascendas REIT
Singapore; Australia; USA; UK; The Netherlands; France; Switzerland
5.0%

17
Daiwa House Logistics Trust
Japan
8.0%

18
EC World REIT
China
N.A.

19
ESR-LOGOS REIT
Singapore; Australia; Japan;
8.0%

20
Mapletree Industrial Trust
Singapore; USA
5.3%

21
Mapletree Logistics Trust
Singapore; Australia; Malaysia; Hong Kong; Japan; Japan; China; South Korea; Vietnam; India
5.2%

22
Sabana REIT
Singapore
6.8%

4. Hospitality REITs

No
REITs And Stapled Securities
Country Exposure
Distribution Yield*

23
ARA US Hospitality Trust
USA
10.3%

24
CapitaLand Ascott Trust
Singapore; Australia; Malaysia; Japan; China; Indonesia; Vietnam; Philippines; France; Germany; Spain; Belgium; UK; US; South Korea
6.2%

25
CDL Hospitality Trust
Singapore; Australia; Japan; UK; Maldives; New Zealand; Germany; Italy
5.1%

26
Far East Hospitality Trust
Singapore
5.5%

27
Frasers Hospitality Trust
Singapore; Australia; Japan; UK; Germany; Malaysia
4.9%

5. Healthcare REITs

No
REITs And Stapled Securities
Country Exposure
Distribution Yield*

28
First REIT
Singapore; Indonesia; South Korea
9.5%

29
Parkway Life REIT
Singapore; Malaysia; Japan
4.0%

6. Diversified & Specialised

No
REITs And Stapled Securities
Country Exposure
Distribution Yield*

30
CapitaLand China Trust
Hong Kong; China
(Retail and business parks)
7.2%

31
Ascendas India Trust
India
(Tech parks + Warehouses)
6.3%

32
CapitaLand Integrated Commercial Trust
Singapore, China, Malaysia
(Retail + Commercial/Office)
5.2%

33
Cromwell European REIT
Denmark, France, Germany, Italy, the Netherlands and Poland; Finland; Slovakia; Czech Republic; UK
(Commercial/Office + Industrial)
11.5%

34
Digital Core REIT
Canada; USA
(Data Centre)
5.9%

35
Frasers Logistics & Commercial Trust
Australia; Germany; Singapore; Netherlands; UK
(Commercial/Office + Industrial)
6.1%

36
Keppel DC REIT
Singapore; China; Australia; Malaysia; UK; Germany; Netherlands; Italy; Ireland
(Data Centre)
5.2%

37
Lendlease Global Commercial Trust
Singapore; Italy
(Retail + Commercial/Office)
7.3%

38
Mapletree Pan Asia Commercial Trust
Singapore; Hong Kong; China; Japan
(Retail + Commercial/Office)
5.6%

39
OUE Commercial Trust
Singapore; China
(Commercial/Office + Hospitality)
7.3%

40
Suntec REIT
Singapore; Australia
(Retail + Commercial/Office)
5.8%

7. Residential REITs

No
REITs And Stapled Securities
Country Exposure
Distribution Yield*

There are currently no residential REITs or stapled securities listed in Singapore. Certain hospitality REITs, such as CapitaLand Ascott Trust, have serviced apartment properties in its portfolio, but are considered hospitality REITs. Saizen REIT, a Japanese REIT that has been delisted since October 2017 was the last residential REIT listed in Singapore.

There are also five REIT exchange traded funds (ETFs) listed in Singapore.

REIT ETFs

No
REITs And Stapled Securities
Listed REITs
Distribution Yield*

43
CSOP iEDGE S-REIT Leaders ETF
Singapore
7.05%

44
Lion-Phillip S-REIT ETF
Singapore
5.77%

45
NikkoAM-Straits Trading Asia Ex Japan REIT ETF
Singapore; Hong Kong; India; South Korea; Malaysia; China
6.16%

46
Phillip SGX APAC Dividend Leaders REIT ETF
Singapore; Australia; Hong Kong; Thailand
5.50%

47
UOB APAC Green REIT ETF
Singapore; Japan; Australia; Hong Kong
4.24%

*Chartbook: SREITs & Property Trusts (Feb 2024) – SGX report

To stay up-to-date with the REIT market, DollarsAndSense also regularly writes a quarterly update on REITs, after they have released their results.

How To Start Investing In REITs?

We can invest in REITs the same way we invest in stocks and other listed securities on SGX. If we’re already investing in stocks, we can simply buy and sell REITs in the same manner.

As mentioned, if we’re entirely new to investing, we need a Central Depository (CDP) Account and a stock brokerage account.

Since REITs tend to pay out distributions of close to 7.0% per annum at regular intervals (quarterly or semi-annually). This makes it an ideal asset class to create a stable stream of dividend income. We can use this to continue growing our REIT or other investment portfolios, or even supplement our retirement income when we’re ready to retire.

Read Also: Here’s How You Can Start Building A Dividend Income Portfolio To Replace Your Wage In Singapore

What Are REIT ETFs?

In Singapore, there are currently five REIT ETFs listed on the SGX. They are:

1) Lion-Phillip S-REIT ETF,
2) NikkoAM-Straits Trading Asia Ex Japan REIT ETF,
3) Phillip SGX APAC Dividend Leaders REIT ETF,
4) CSOP iEDGE S-REIT Leaders ETF, and
5) UOB APAC Green REIT ETF.

Primarily comprising high-quality REITs listed in the Asia Pacific region, REIT ETFs are typically passively managed. The main advantage of investing in REIT ETFs is their ability to free us from having to research, monitor and rebalance our REIT portfolio. It also ensures our REIT portfolio is widely diversified across different REITs geographically.

Of course, for this convenience, we have to pay a management fee. Over the long term, this may eat into our returns, so we need to carefully judge whether or not to embark on REIT ETF investing. As it is, we’re paying two types of fees when we invest in REITs – REIT management fees and property management fees.

Here are articles that give us a little more information about the REIT ETFs listed in Singapore.

Read Also: Investing in REIT ETFs Listed In Singapore: 5 Things You Need To Know

Read Also: REIT ETFs – Really The Best Of Both Worlds?

Investing In A Managed REIT Portfolio

A new product on the market is Syfe REIT+, which provides investors with the opportunity to invest in a risk-managed portfolio of S-REITs. Offered by Syfe, investors get exposure to a portfolio built from 15 high-quality REITs, based on their own risk-profile.

Read Also: Syfe REIT+: Why This Newest Robo-Advisory Product Is A Great Way To Get Started On Your REITs Portfolio

Pros And Cons To Investing In REITs VS Physical Properties

Many of us may dream of owning our own private properties that we can collect lucrative rents on as well as capture high capital appreciation when an en-bloc opportunity or willing buyer comes along.

While we tend to only look at the positives, there are both pros and cons to owning properties VS REITs.

Criteria
REITs
Physical Properties

Initial Capital Outlay
As little as a few hundred dollars
Minimum of 25% of property price, which is at least several hundred thousand dollars

Employing Leverage (a.k.a.using loans/debt)
Can leverage up to 3.5 times (depending on stock brokerage and actual REIT)

Interest rates from around 3%; but can be much higher – around the 6% range

Up to 75% leverage on individual property. But, must adhere to TDSR and LTV limits

Interest rates hovering at the 3% range

Administrative Work
Buy via your brokerage account with a few clicks
Have to work with property agent, arrange viewing, negotiate price, make hefty down payment, secure loan facility, pay stamp duty, get a tenant

Liquidity
Can sell at market price during trading hours. Receive proceeds in a few days
Takes a much longer time to sell property and to receive proceeds after that

Diversification
REITs are diversified across multiple properties/buildings. Investing in REIT ETFs provides even more diversification benefits
Hard to invest in more than a couple of properties with hefty down payment requirements.

Management
Professional managers – which are paid a hefty fee
Manage own property

Control
Almost no control as small retail investor. Can only buy or sell
Have full control over how we manage property

Growing Portfolio
Can invest more in the same or other REITs with a few hundred dollars. Can employ regular investing strategies
Have to go through tedious process each time we buy another property. Down payment and loan restrictions also make it harder to grow your own property portfolio

Taxes
Dividends we receive are not taxable
Rental income we receive is taxable

Managing Returns
Receive returns on a regular basis
May have to chase tenants and negotiate rents on our own.

To read further on the pros and cons of investing in each asset class, here are some articles we’ve written on the topic.

Read Also: Property Lovers In Singapore: Invest Via Condos, REITS Or Real Estate Companies?

Important Questions We Should Ask When We Decide To Invest In REITs

#1 Does The REIT Own High-Quality Properties?

One simple way to judge whether investing in a REIT will be a good long-term investment is simply to look at its properties. Many Singapore-listed REITs have properties in Singapore that we can go to.

Malls such as Suntec City, Vivo City, Plaza Singapura, Causeway Point, Takashimaya are all owned by different REITs in Singapore. We can choose to invest in REITs that own properties that we prefer visiting ourselves, as they provide a good indicator of how other consumers may think.

It doesn’t just stop at malls, there are office buildings such as China Square Central, Asia Square, Suntec, One Raffles Place and many more as well as industrial hubs such as properties in Changi Business Park, Airport Boulevard, Woodlands Central that are all owned by REITs. We can easily visit these properties or do a little desktop research into whether people like to dislike these locations and property types. Of course, it’s harder to assess foreign properties, so desktop research is still important.

#2 Where Do You See The REIT In 10 Years?

Another good indicator is whether we see the properties in the portfolio continuing to do well in the next 10 years.

Some further questions may include:

Are these properties well-maintained or look dated?
Are these properties in good locations or ones that may go out of favour?

We could also look at how highly geared these REITs are. REITs that have high levels of debt may be at higher risk when interest rates go up, or may not have as much opportunity to add to its portfolio. This may also be an indicator of whether they will be able to invest in new opportunities at the right time.

Many REITs that are highly geared have come under intense scrutiny lately, as interest rates have gone up and occupancy has been impacted by post-COVID-19 shifts in tenants’ property requirements. Some REITs have tanked as much as 90% – and even halted distributions.

3 Does It Have A Management Team You Believe In?

We could also go to the individual REITs’ Annual General Meeting (AGM) to speak to the management team. This may give us some insights into the character of the people managing our investments.

We should also look at its track record, are they able to spot good investment opportunities at good valuations? Are they fair to minority shareholders during rights issue or placements when they need to raise funds?

#4 Are You Confident In Choosing The Right REIT Yourself?

Lastly, we should ask ourselves if we’re confident of choosing the right REIT and investing at the right time.

If we aren’t so sure, we can invest all or part of our money via the REIT ETFs and via regular investment plans. This will ensure our portfolio is well-diversified and we do not time the markets. We could also go with Syfe’s REIT+ portfolio.

Read Also: Step-By-Step Guide To Investing Using Regular Shares Savings (RSS) Plan

This article was first published on 19 June 2018 and updated with the latest information. 

The post Complete Guide To Start Your REITs Investing Journey In Singapore appeared first on DollarsAndSense.sg.