An Overview on Real Estate Investment Trusts

Real Estate Investment Trusts (“REITs”) has been a popular asset class for investors in Singapore and the growing interest of this asset class created REITs Symposium 6 years ago.

Into the 7th edition, happening on both 15 and 22 May virtually, we will feature a series of 7 articles in the next 2 weeks, providing you with an overview of REITs landscape.

REITs Symposium #1 - An Overview on Real Estate Investment Trusts

REITs are companies that own, operates, or finances income-generating real estate. REITs pool the capital of numerous investors together in a collective investment scheme that invests in a portfolio of income-generating real estate assets such as shopping malls, offices, hotels or serviced apartments.

This makes it possible for individual investors to earn dividends from real estate investments—without having to buy, manage, or finance any properties themselves.

Currently, there are several types of REITs listed on SGX. The following is a list of categories of REITS that investors can invest in and the type of properties that they own:

• Commercial REITs – Office buildings

• Retail REITs – Shopping malls

• Industrial REITs – Warehouses, Logistics facilities

• Hospitality REITs – Hotels and Serviced residences

• Healthcare REITs – Hospitals and Nursing homes

Latest Development in the REITs Space

Successful Privatization of Soilbuild Business Space REIT

On 14 December 2020, Soilbuild Group’s Chairman, Mr. Lim Chap Huat partners with Blackstone to privatise Soilbuild Business Space REIT. The privatisation will be done through the way of a Trust Scheme. The Scheme Consideration of S$0.550 per Unit, which represents a premium of 34.5% over 1-month Volume Weight Average Price (VWAP).

In conjunction with the Trust Scheme, Soilbuild Business Space Trust have entered into a unit sale agreement with the related entities of Blackstone for the disposal of all the issued and paid-up units of Soilbuild Australia Trust.

With the approval of the Trust Scheme, Soilbuild Business Space REIT has delisted from the Singapore Exchange with effect from 14 April 2021. Following delisting, the REIT will be a private trust and will cease to be an authorised collective investment scheme.

Slews of Acquisitions by the Various REITs

Mapletree Logistics Trust (SGX: M44U)

On 25 March 2021, Mapletree Logistic Trust has announced the completion of acquisition of two logistic properties in India, making it the REIT’s first foray into the country.

The total purchase price for these two logistic properties came in at 4.55 billion rupees ($84.2 million). The properties come with a total occupancy of 98.2% and a net property income yield of 7.4%.

Ms. Ng Kiat, Chief Executive Officer of Mapletree Logistic Trust said, “This will be MLT’s first acquisition in India, a fast growing logistics market that offers attractive long term prospects. Strong demand for logistics space is underpinned by a large growing consumer market, rapidly developing e-commerce, India’s increasing importance as a major manufacturing hub in Asia Pacific as well as a severe lack of supply of Grade A warehouses. The Acquisition will enhance our geographical diversification and network connectivity, positioning MLT well to capture future growth opportunities in the region.”

Ascendas REIT (SGX: A17U)

On 17 March 2021, Ascendas REIT completed the acquisition of a portfolio of 11 data centres in Europe, comprising four data centres in the United Kingdom, three data centres in the Netherlan

The total consideration for this acquisition came in at S$904.6 million. The overall occupancy rate stood at 97.9% and a Weighted Average Lease Expiry (“WALE”) of 4.6 years. Also, Ascendas REIT expects the 1st year net property income yield to be at 5.7%.

Mr. William Tay, Executive Director and Chief Executive Officer of Ascendas REIT said, “This acquisition gives us a unique opportunity to own a portfolio of well-occupied data centres located across key markets in Europe. It complements our existing data centre portfolio in Singapore and will increase the sector’s contribution to S$1.5 billion or 10% of investment properties under management. We see good potential in the data centre business and will continue to source and make further acquisitions when the opportunities arise.”

Inclusion of Frasers Logistics & Commercial Trust into Straits Times Index

With the privatisation of Jardine Strategic Holdings Limited by Jardine Matheson Holdings Limited, this resulted in a spot being free up in the Straits Times Index (STI), which will have to replace by a counter within the STI Reserve List.

Within the list, Frasers Logistics & Commercial Trust, Frasers Centrepoint Trust, Suntec Reit, Keppel Reit and NetLink NBN Trust are the five highest-ranking non-constituents by market capitalisation.

Hence, with Frasers Logistics & Commercial Trust having the largest market cap within the list, it was included into the STI, in replace of Jardin Strategic Holdings Limited.

With this latest inclusion, the number of REITs within the STI risen to 7, which are:

• Ascendas REIT (SGX: A17U)

• CapitaLand Integrated Commercial Trust (SGX: C38U)

• Frasers Logistic & Commercial Trust (SGX: BUOU)

• Keppel DC REIT (SGX: AJBU)

• Mapletree Commercial Trust (SGX: N2IU)

• Mapletree Industrial Trust (SGX: ME8U)

• Mapletree Logistics Trust (SGX: M44U)

This makes REITs the third largest sector in the STI, with a combined index weightage of 15%, after Financials and Industrial sectors.

Overall, this highlights the increasing popularity and influence that the REITs sector has on the economy as well as the benchmark index.

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