The Top 10 Singapore REITs Over the Past 10 Years

For long-term investors, Singapore’s real estate investment trusts (or REITs) have been one of the most rewarding areas of the local stock market in recent years.

Last week, ProsperUs hosted a webinar on Singapore REITs with myself, CGS-CIMB’s Chief Investment Strategist Say Boon Lim and Seedly’s Investment Lead Sudhan Purushothuman.

We discussed everything from how to identify the best REITs in Singapore to what the outlook is for the REITs space in the post-pandemic normal.

One of the key points raised for REIT investors is that we shouldn’t focus so much on the “distribution yield”, otherwise known as the dividend yield.

That’s because a freakishly high distribution yield can inevitably be the result of a collapse in share price, an impending dividend cut, or both.

Instead, just like when we look at buying stocks, we need to focus on REITs that have quality assets and management while also owning properties in the right sectors.

Winners win

Source: SGX.com

That’s been proved by Singapore’s top-performing REITs and property trusts over the past 10 years (see table above).

According to SGX, the 10 best-performing S-REITs and trusts (that have had at least a decade of listing history) delivered average annualised total returns of 12.5% over the period.

Compare that to Singapore’s benchmark Straits Times Index – which managed an annualised total return of just 4.1% over the decade – and it becomes clear that owning the best-in-class REITs does pay off over the long term.

As for the much sought-after “high yield” REITs, out of the top five only one currently yields more than 5%. It’s an apt illustration of how the total return figure matters much more than the dividend yield.

Riding the property trends

As for the best performers, it turns out to be the usual suspects. Mapletree Industrial Trust (SGX: ME8U) tops the list with an average annualised return of a whopping 16.7%.

The REIT started out life in the public markets in October 2010, with an initial real estate portfolio of 70 properties, valued at S$2.1 billion.

Fast forward to today and that’s grown to 114 properties worth S$6.7 billion, while Mapletree Industrial also started its expansion into the fast-growing data centre space back in 2017.

Meanwhile, REITs like Mapletree Logistics Trust (SGX: M44U), Parkway Life REIT (SGX: C2PU) and Ascendas India Trust (SGX: CY6U) have all benefitted from owning quality assets and operating in property sectors that have robust tailwinds driving demand.

Strong sponsors pay dividends

No surprises came from seeing the top three spots taken by Mapletree REITs given the heft of Mapletree Investments.

The real estate investment firm is a veritable juggernaut and owns, as well as manages, around S$66 billion of data centre, lodging, logistics, mixed-use, office, residential and retail properties.

For investors looking at buying into quality REITs, it’s validation that having a strong “sponsor” parent is critical for a number of reasons.

First off, it allows the REIT access to a pipeline of potential properties to add to its portfolio – most likely at a reasonable valuation.

Secondly, the REIT is under no obligation to buy these properties (if it doesn’t see them adding value) through a mechanism known as “right of first refusal” or ROFR.

Lastly, having a strong sponsor backing a REIT also tends to translate into favourable lending rates given banks and investors tend to view them as more credit-worthy borrowers than smaller independent REITs that have no sponsor.

Bringing home the DPU

Overall, for investors looking into the REIT space, it pays to have a long-term perspective on what assets you want exposure to.

That’s because some REITs might now be out of favour (because the “flavour of the month” is reopening plays) but over the longer term quality wins out.

Yet only by taking a long-term perspective, of at least five years but ideally more, can we truly appreciate which REITs have a rock-solid track record of rewarding investors.

Disclaimer: ProsperUs Head of Content Tim Phillips owns shares of Mapletree Industrial Trust, Mapletree Logistics Trust and Parkway Life REIT.