From building our first skyscraper 75 years ago, Singapore is now home to more than 175 skyscrapers. This tally is conducted by Emporis and ranks Singapore number 11 in cities with the highest number of skyscrapers. It is commonly known that skyscrapers are differentiated in architectural design, in addition to purpose and tenants.
Singapore investors, who have traditionally looked to residential skyscrapers for investing, or a second home, now have more choices – including the purchase of shares of a trust invested in a commercial tower within the CBD. These Real Estate Investment Trusts (REITs) have been available to investors since 2002 and simplify the process of investing in the benefits and risks of commercial, retail, residential, industrial and healthcare-related properties.
From the listing of CapitaLand Mall Trust in 2002 to BHG Retail Trust in 2015, there are now 29 REITs and six stapled securities listed on Singapore Exchange (SGX).
SGX S-REIT Index
The SGX S-REIT Index was established last year. It is a free-float, market capitalisation-weighted index that measures the performance of stocks operating within the REIT Sector. The 10 largest constituents of the SGX S-REIT Index account for 64.7% of the Index weights.
The Index is also diversified across types of property assets. The Global Industry Classification Standard (GICS®) is applied by SGX StockFacts to help define the different sectorial focus within the REIT sector. Retail REITs, which are made up of shopping malls, account for the largest index weights. CapitaLand Mall Trust, a retail REIT, was the first REIT to list in 2002, almost thirty years after Singapore’s first shopping centre became air-conditioned. The Retail REIT Sector spans businesses engaged in the acquisition, development, ownership, leasing, management and operation of shopping malls, outlet malls, neighbourhood and community shopping centres.
Source: SGX (data as of 22 February 2016)
Constituents of the SGX S-REIT Index are diversified by property type in addition to location. More than half the trusts have property assets located outside Singapore, mostly around Asia. This includes countries such as China, Hong Kong, Vietnam, Japan, Indonesia, South Korea, Philippines and Malaysia.
The Index has generated a total return of 2.8% in the 2016 year-to-date, compared to the MSCI World REIT Index, which has declined 5.1% in Singapore Dollar terms. Note that REITs were created in the United States in the 1960s hence the majority of the MSCI World REIT market capitalisation is made up of businesses based in United States. In comparison with the United States, REIT Indices in Asia have less stretched valuations, higher dividend yields and lower gearing ratios.
SGX S-REIT Index Constituents
The weightings and recent performances of the SGX S-REIT Index are detailed in the table below. Of the 32 constituents, 11 have listed over the past five years. These constituents included Mapletree Commercial Trust, Mapletree Greater China Commercial Trust, SPH REIT, Far East Hospitality Trust, OUE Hospitality Trust, Soilbuild Business Space REIT, Croesus Retail Trust, Frasers Hospitality Trust, OUE Commercial REIT, Viva Industrial Trust and IREIT Global.
As tabled above, the SGX S-REIT Index constituents have averaged a 36.8% total return over the past five years. The average indicative dividend yield is current 7.7% – almost double that of the MSCI World REIT Index at 4.1%. The table below is also sort by index weighting and details 12 month highs and lows of each of the constituents.
Credit of this article to: SGX My Gateway update,