The S-REIT sector comprises more than 40 listed REITs, of which at least 20 have a market capitalization of a billion dollars or more. Smaller S-REITs may be shunned by some investors because they may not be part of broader indices and have fewer institutional investors.
In Singapore, it is also a trend for many sponsors with a longer track record to scale up their REITs either through acquisitions over the years or by conducting mergers between sister REITs.
Here we look at 3 under the radar REITs with market capitalization below a billion dollars and dividend yields exceeding 8%. These three REITs also have shorter listing tenures, ranging between 3 and 5 years, and may not yet have the opportunity to build up a track record with the investor base.
| REIT | Ticker (SGX) | 1Y total returns | Yield | P/B (times) | Gearing |
| Daiwa House Logistics Trust | DHLU | 12.2% | 8.0% | 0.8 | 36.2% |
| Sasseur REIT | CRPU | -1.1% | 9.0% | 0.8 | 25.4% |
| United Hampshire US REIT | ODBU | 22.7% | 11.1% | 0.7 | 41.7% |
1) Daiwa House Logistics Trust (SGX: DHLU)
Daiwa House Logistics Trust (SGX:DHLT) is one of the newest entrant to Singapore, having listed in November 2021 at $0.80 and currently trading at $0.64, about 20% below its IPO price.
In its recent 3Q23 business update, DHLT reported that its portfolio performance remained strong as gross rental income (“GRI”) and net property income (“NPI”) for 9M FY2023, in JPY terms, improved by 4.9% and 3.9% YoY respectively.
DHLT has maintained its track record of 100% lease renewal since its listing almost two years ago and the portfolio was maintained at full occupancy with a weighted average lease expiry (“WALE”) of 6.3 year.
DHLT has a weighted average debt tenure of 2.3 years and a weighted average borrowing cost of 0.99%. All of the debt is fixed and DHLT has an interest coverage ratio of 11.8 times.
As part of its plan to diversify geographically into Vietnam, Daiwa house acquired a cold storage logistics facility in Vietnam from its Sponsor. The property was recently completed and fully leased for 20 years, providing stability. The acquisition is expected to be accretive to DPU by 1.9%.
DHLT has been fundamentally stable but was affected by the deteriorating Japanese yen. Although there were income hedges in place, these income hedges would gradually expire and be renewed at weaker rates.
The share price has been impacted as the Japanese Yen has weakened by nearly 30% and with the Bank of Japan continuing to ease monetary policy, investors have been concerned about the future impact of the weakened yen.
2) Sasseur REIT (SGX: CRPU)
Sasseur REIT listed in Mar 2018 at $0.80 and is currently trading at $0.68, about 15% below its IPO price.
Sasseur REIT recovered strongly in 2023 after being impeded by lockdowns in 2022.
In its recent 3Q23 business update, Sasseur REIT reported that its portfolio performance marked a strong recovery as outlet sales grew nearly 19% YoY. Rental income, measured in both RMB and SGD terms, increased by 7.5% and decreased by 1.5% YoY, respectively. This was due to strong sales from its outlet business which is considered defensive and counter-cyclical.
DPU decreased by 7.9% YoY due to the weakening RMB. DPU would have increased 2% YoY on a constant current basis.
Portfolio occupancy stood at 97.9%, a record high since IPO while its WALE was at 2.4 years.
Sasseur REIT has a weighted average debt tenure of 3.0 years and a weighted average borrowing cost of 5.8%. 77% of the debt is fixed and Sasseur REIT has an interest coverage ratio of 4.0 times.
Sasseur REIT has about 13% or RMB 308 million of its borrowings owing to its Sponsor, who granted the REIT a 1-year extension until February 2025. While it has to be acknowledged that Sasseur REIT received strong sponsor support, it is worth noting that Sasseur REIT did not utilise bank financing instead, and this is likely due to the unconducive borrowing environment.
Sasseur REIT is looking towards continued strength next year as China’s economy is expected to grow at least 4.5%, outperforming many countries globally despite perceived weaknesses.
Sasseur REIT has not carried out a single acquisition since its IPO. With one of the lowest gearing in the S-REIT sector at 25.4%, this puts the REIT in a good position to make its maiden acquisition. There are a few potential targets within its sponsor Sasseur Group’s stable. Should the property sector and the economy in China start to present clear green shoots of recovery and growth, there is a strong possibility that Sasseur REIT will carry out an accretive acquisition.
3) United Hampshire US REIT (SGX: ODBU)
United Hampshire was listed in Mar 2020 with an IPO price of US$0.80. Due to the onset of the COVID-19 outbreak that month, the REIT opened for trading at US$0.72.
United Hampshire is now trading at US$0.50, partially due to a private placement in Oct 2021 at US$0.63 which was a 3.4% discount to the trading price but substantially below the IPO price. The private placement was used to fund its acquisition of two grocery anchored freehold assets in the US.
In its recent 3Q23 business update, United Hampshire reported an 11.7% YoY increase in Gross Revenue and a 12.2% YoY increase in Net Property Income for 9M2023. However, DPU was flat due to higher finance cost.
The committed occupancy for Grocery & Necessity Properties remains high at 97.2% with a strong tenant retention rate of 92% since IPO. United Hampshire has a diversified tenant base, with 63.6% providing essential goods and services.
United Hampshire’s portfolio has a long WALE of 7.2 years, with a majority of its leases structured as triple net agreements with built-in rental escalations.
United Hampshire’s trailing 12 month interest rate cost stood at 4.04% as compared to 3.05% a year ago. 80.9% of debt was fixed with minimal near-term refinancing requirements and 93.4% of debt maturing in November 2026 or later.
As a result of a robust economy in spite of high inflation, Utd Hampshire’s assets are doing well and the sector is seeing foot traffic hovering around pre-pandemic levels.
The REIT’s assets have a greater emphasis on essential (e.g., groceries, drug stores, and medical services) and off-price compared to other retail formats is a highly desirable attribute in a period when consumers are diligently managing their budgets, pressured by stubbornly high interest rates.
Utd Hampshire’s self-storage sector is also robust with occupancy at pre-Covid levels (~92% on average), resulting in more modest existing customer rate increases. However, peak leasing season in 2023 proved to be slow in light of sluggish home sale activity, which is a key driver of storage demand in the spring and summer months.
Due to the uncertain economic conditions ahead, Utd Hampshire will continue to focus its efforts on optimising the portfolio and strengthening its income streams through asset enhancement and upgrade initiatives.
It recently completed construction of a new Academy sports store at its Port St Lucie property. The new store is expected to enhance the financial performance of the property and is also expected to generate a significant increase in foot traffic at the property.
Closing statements
These 3 REITs tend to be under the radar due to their short listed timeframe and smaller market capitalization. The REIT may also not be well diversified as compared to the larger REITs. Nonetheless, the fundamentals of the REITs seem to be robust and the REITs are trading below their IPO price and at attractive valuations due to the high interest environment.
While there are reasons for their lacklustre performance, both attributable to the macroeconomic conditions as well as issues specific to them, these REITs do have the potential to further improve their fundamentals should the right conditions be present.
As such REITs tend to exhibit a larger range of price movements (i.e., higher volatility) in the light of any news, investors should be wary of both the potential downside risks and opportunities for upside when considering such REITs.
Also read: Best REITs in Singapore