One of the widely referred benchmark for S-REITs is the iEdge S-REIT Leaders Index. This index comprises of most blue chip S-REIT chips and is a good indicator of overall REIT performance.
The top 12 holdings which in total comprise nearly 90% of the index are presented in the table below.
| Name | Ticker | Weighting (%) | Share Price |
| Mapletree Logistics Trust | M44U | 10.3 | 1.66 |
| CapitaLand Ascendas REIT | A17U | 10.2 | 2.71 |
| CapitaLand Integrated Commercial Trust | C38U | 10.2 | 1.9 |
| Mapletree Industrial Trust | ME8U | 9.4 | 2.21 |
| Mapletree Pan Asia Commercial Trust | N2IU | 9.4 | 1.54 |
| Frasers Logistics & Commercial Trust | BUOU | 8.9 | 1.19 |
| Keppel DC REIT | AJBU | 6.1 | 2.1 |
| Suntec REIT | T82U | 5.5 | 1.2 |
| Keppel REIT | K71U | 5.2 | 0.875 |
| Frasers Centrepoint Trust | J69U | 4.6 | 2.19 |
| CapitaLand Ascott Trust | HMN | 4.6 | 1.01 |
| Lendlease Global Commercial REIT | JYEU | 3.0 | 0.61 |
This index has fallen about 5% from a month ago. In comparison, the Straits Times Index is down 2%. In the US, the S&P 500 index is down 4% and the Nasdaq is down 7%. In Hong Kong, the Hang Seng Index is down 5%.
It seems like the correction is in line with other major indices.
One likely reason is that long-term interest rates have risen, and higher interest rates may remain for a longer period, hurting all the valuation of stocks.
Fundamentally, as REITs carry a sizeable amount of debt, there is also an immediate and direct impact on the REITs’ distribution.
Outlook for SREITs
1) Macroeconomic weakening and Sector woes
The performance of property assets tends to be closely linked to the macroeconomy. Many of the biggest S-REITs are diversified with exposure to office and retail. Some are exposed to the logistics and industrial sectors. Hospitality, data centre and healthcare REITs are a much smaller minority.
The office segment globally has been affected by companies downsizing their space whether due to a change in work requirements or an attempt at cost saving.
The retail segment relies on a strong consumer spending environment to perform well. Rental income in this segment tends to have a variable component which ties in with the amount of shopper spend.
In Singapore, as the diversified, office and retail REITs comprise of more than 50% of total market cap, it is significantly impact by the aforementioned factors.
Hospitality REITs, especially ones with a higher concentration of assets in Singapore have seen stronger performance due to the confident outlook underpinned by concerts and events that are slated to be held in the first half of 2024. Globally, there is also a trend where consumer discretionary spend are being allocated towards travel.
Data Centre REITs listed in Singapore tend to have long WALE, built in rental escalations and are well regarded as a stable investment backed by strong sponsors and stable growth.
2) Foreign currency translation
The stronger Singapore Dollar have weighed down on REITs with overseas properties.
As we know, most REITs in Singapore have a sizeable exposure of overseas assets. While there might be income hedges in place, not many REITs hedge the entirety of its overseas income and hence their foreign income would be of lesser value when distributed in the Singapore Dollar.
In the Monetary of Authority of Singapore’s April 2023 statement, it was mentioned that the MAS will maintain the prevailing rate of appreciation of the Singapore Dollar via its policy band. The objective of this policy stance was to reduce imported inflation and help curb domestic cost pressures.
Which SREITs are less impacted by higher rates?
REITs less impacted by higher rates would have the following characteristics:
1) Lower gearing
As we have been in a high interest rate environment for quite some time now, many REITs would have seen its low interest rate hedges mature and may have to hedge its interest rates at prevailing rates. Hence, it is safe to say that the REITs that would be less affected would be the ones with lower gearing.
Here we identified 10 S-REITs with the lowest gearing ratios for your reference:
| Name | Ticker | GEARING RATIO (%) |
| Sasseur REIT | CRPU | 27.6 |
| Frasers Logistics & Commercial Trust | BUOU | 27.9 |
| Paragon REIT | SK6U | 29.8 |
| Far East Hospitality Trust | Q5T | 32 |
| IReit Global | UD1U | 32 |
| Sabana Industrial REIT | M1GU | 32.4 |
| Frasers Centrepoint Trust | J69U | 33.9 |
| Digital Core REIT | DCRU | 34 |
| Frasers Hospitality Trust | ACV | 35.2 |
| Daiwa House Logistics Trust | DHLU | 35.9 |
2) Exposure to countries with low interest rate such as Japan and China
Japan is well known for being one of the few developed countries with interest rates close to zero. Unlike many western countries who have been on a steep monetary tightening policy, China is very much the opposite, ramping up stimulus to stabilise its economy.
Here are some S-REITs with exposure to both China and Japan
| Name | STOCK CODE |
| Mapletree Logistics Trust | M44U |
| Mapletree Pan Asia Commercial Trust | N2IU |
| CapitaLand Ascott Trust | HMN |
| Starhill Global REIT | P40U |
REITs such as Parkway Life REIT, Daiwa House Logistics Trust, Sasseur REIT and Capitaland China Trust only have exposure to one of these two countries but are worth mentioning as their overall portfolio is concentrated in these countries who are in a low interest rate environment.
Should I wait before buying or should I just buy now?
Due to the low confidence resulting in weakness in share prices, the average yield for each asset class has risen significantly. Many REITs are also trading near or below book value and are cheap from a fundamental perspective. One may also take a contrarian view and buy when it is perceived to be cheap.
What if I perform Dollar Cost Averaging then?
Dollar-cost averaging (DCA) is a strategy that can make it easier to deal with uncertain markets by making purchases automatic. It also supports an investor’s effort to invest regularly.
DCA involves investing the same amount of money in a target security at regular intervals over a certain period of time, regardless of price.
In effect, this strategy eliminates the effort required to attempt to time the market to buy at the best prices.
The index yields more than 5% as the top 12 REITs mostly if not all provides for a yield of at least 5%. This benefit of receiving significant dividends periodically helps reduce the cost of DCA and lowers the average cost even further.
For investors who are keen in building a portfolio with recurring income, this would be the most optimal approach.