• Over the past 4 weeks, the iEdge S-REIT Index declined 2.1% after a rally anticipating the 50 bps rate cut on Sep 18, with a total 3Q24 gain of 17.5%. The Index's 3.8% decline from the Sep 20 high has coincided with the resilient US economy and FFR expectations rising by 18 bps post-Dec 18 FOMC and 45 bps post-Mar 19 FOMC. 
   
• In 1H24, the S-REIT Sector saw S$1.07 billion in net institutional outflows. Since then, 16% of this has been reversed with net inflows in 2H24 up to October 15. The S-REIT Sector is now among the top four Singapore stock sectors for net institutional inflows since June 30.
   
• In the Sector, Acrophyte Hospitality Trust saw the highest 2H24 to Oct 15 net institutional inflow relative to market cap, driven by transactions associated with its significant rebrand. The next 10 Trusts with the highest net institutional inflow relative to market cap since June 30 on average doubled the iEdge S-REIT Index gains.
   

Over the past four weeks, the iEdge S-REIT Index experienced a slight decline, following on from the rally in anticipation of the 50 bps rate cut delivered at the Sep 18 FOMC. In 3Q24 through to Sep 18, the key REIT Index gained 14.8% with distributions boosting the total return to 17.5%. Since Sep 18, the Index has declined 2.1%. 

The four weeks have also seen the rate outlook inch less accommodative on account of the resilience of the US economy. This has seen the iEdge S-REIT Index decline 3.8% from the Sep 20 high of 1,143 to 1,100. Simultaneously, the CME December 2024 Fed Fund Futures indicate that since the iEdge S-REIT peak on September 20, rate expectations for after the December 18 FOMC meeting have risen by 18 basis points, and by 45 basis points following the March 19 FOMC meeting. Like the Fed Fund Futures, the iEdge S-REIT Leaders Index is tradable as a futures contract. The directional correlation in these markets over the past 12 months is illustrated below. 

Segment of S-REITs with Highest Proportionate Net Institutional Inflow since June 30

Since June 30, the iEdge S-REIT Index has added 12.4% with distributions boosting the total return to 15.0%. Acrophyte Hospitality Trust recorded the highest net institutional inflow relative to its market cap from 2H24 to Oct 15, largely due to transactions linked to its significant rebranding efforts. Following Acrophyte, the next 10 Trusts in the Sector with the highest net institutional inflow relative to market cap since June 30 have, on average, achieved 33.0% total returns that doubled those of the iEdge S-REIT Index. 

Note ADT refers to Average Daily Trading Turnover; NIF refers to Net Institutional Inflow, TR refers to Total Return. Data as of 15 Oct 2024

The table above includes 11 of the 15 trusts of the S-REIT Sector that have booked net institutional inflow in 2H24 to Oct 15. This means 24 of the trusts in the Sector have booked net institutional outflow over the period, of which 22 also booked net institutional outflow in 1H24. 

In 1H24, the S-REIT Sector booked S$1.071 billion of net institutional outflow. Institutions have since reversed 16% of that net outflow with net inflow in 2H24 to Oct 15. Still, as illustrated below, the REIT Sector has ranked among the four sectors that have booked the most net institutional inflow since June 30. 

S-REITs that have seen the Highest Reversals of 1H24 Net Institutional Outflow

After Mapletree Logistics Trust and Mapletree Pan Asia Commercial Trust led the net institutional outflow within the S-REIT Sector in 1H24, the latter has seen the highest net institutional inflow in the Sector since June 30. Mapletree Logistics Trust has seen the fifth highest net institutional inflow within the Sector, while Suntec REIT, Keppel DC REIT and Acrophyte Hospitality Trust make up the five trusts with the highest 2H24 to Oct 15 net institutional inflow.

The three trusts of the Sector that have more than reversed 1H24 net institutional outflow with net institutional inflow in 2H24 to Oct 15 include Acrophyte Hospitality Trust, Suntec REIT and OUE REIT. 

Note the contrasting flows for Acrophyte Hospitality Trust have coincided with Acrophyte completing the acquisition of 19% the stapled securities of ARA US Hospitality Trust from ARA Real Estate Investors 23 Pte Ltd on July 9. Meanwhile, Keppel DC REIT reversed 97% of its 1H24 net institutional outflow, Cromwell European REIT reversed 75%, Mapletree Pan Asia Commercial Trust reversed 57%, CapitaLand India Trust reversed 43%, while Keppel REIT has reversed 40%.  

The contrast in 1H24 and 2H24 to Oct 15 flows are tabled below, with the table sort by the highest 2H15 to Oct 15 net institutional inflow. 

Note ADT refers to Average Daily Trading Turnover; NIF refers to Net Institutional Inflow, TR refers to Total Return. Data as of 15 Oct 2024

Aside from the recent reprieve in financing costs, key growth drivers for S-REITs in 2H24 include occupancy rates, positive rental reversions, and asset enhancement initiatives. Engaging a diverse tenant base, proactive capital management, and accretive transactions also foster growth in the Sector. 

Parkway Life REIT will provide a 3QFY24 Business Update after the close today, with Keppel DC REIT and Sabana Industrial REIT following suit on Friday. Next week, there are 10 REITs reporting or providing business updates. They are Keppel REIT, Mapletree Logistics Trust, Keppel Pacific Oak US REIT, OUE REIT, Digital Core REIT, Mapletree Pan Asia Commercial Trust, CapitaLand India Trust, Suntec REIT, Frasers Centrepoint Trust, and CapitaLand Ascendas REIT.

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