SREITs resilient in the near-term with controlled debt levels and relative higher dividend yields
1Q22 global equity markets performances were governed by geopolitical tensions, a rate hike cycle in US and rising inflation. Given REITs’ general sensitivity to interest rates changes, global REITs markets were also impacted. The FTSE EPRA Nareit Developed Index posted a 3.8% decline in the quarter. Major REIT benchmarks in Australia, Japan, Hong Kong and US posted -4.9% average total returns in the same period. The S-REITs sector was a notable outperformer and demonstrated resiliency, despite near-term macro headwinds, with the iEdge S-REIT Index returning 1.3%.
Despite the backdrop of increasing rates (where Singapore Government Securities 10Y bond yields increased 64bps on a year-to-date basis), S-REITs with the sector average dividend yield of 6.3% (as of end February ’22), are still offering a higher spread of around 400bps. Further, the sector appears to have controlled debt levels, with an average gearing ratio (total debt/total assets) of c. 37%, lower than the regulatory limit of 50%. The sector has also on average secured 75% of their borrowings on fixed rates.
According to Beansprout (an independent research firm), Singapore’s REIT benchmark generated positive returns in previous episodes of interest rate increases: 25.8% total return in (June ’04 to 2006) and 11.9% total return (December ’15 to December ’16).
Top performing S-REITs & Property Trusts in 1Q22 averaged +14.1% total returns
The top performing S-REITs and property trusts in the recently concluded quarter are mainly from the hospitality and office sub-segments, with the top five performing names averaging +14.1% total returns (see table below), outperforming the STI’s +9.6%.
Two drivers that potentially drove the sub-segments were:
Stock Name |
Code |
Mkt Cap S$M |
1Q22 Total Return % |
Div Yield (%) |
Gearing Ratio (%) |
Suntec REIT |
T82U |
5,018 |
17.6 |
5.4 |
43.7 |
Frasers Hospitality Trust |
ACV |
1,030 |
15.1 |
2.2 |
42.5 |
Far East Hospitality Trust |
Q5T |
1,285 |
13.1 |
4.5 |
38.3 |
CDL Hospitality Trust |
J85 |
1,588 |
13.0 |
3.8 |
39.1 |
Ascott Residence Trust |
HMN |
3,710 |
11.5 |
4.2 |
37.1 |
Source: Bloomberg, SGX
Note: Dividend yield and gearing ratio extracted from March edition of SGX SREITs & Property Trusts Chartbook. Market capitalization as of 31 March 2022
Created by SGX | Sep 12, 2024
Created by SGX | Sep 09, 2024
Created by SGX | Sep 03, 2024