REITs are an extremely popular investment choice in Singapore, with the country being the largest REIT market in Asia (ex-Japan). As of February 2025, the 39 Singapore REITs (S-REITs) and property trusts have a total market cap of S$82bn, making up 10% of the Singapore Exchange's market cap. In a small country like Singapore, it is no surprise that more than 90% of S-REITs own properties outside Singapore. S-REITs are well-diversified across various sub-sectors, including industrial, retail, office, hospitality, data center and healthcare.
Fun fact: S-REITs that own Singapore real estate properties must distribute at least 90% of their specified taxable income to unitholders to qualify for tax transparency treatment. With quarterly/semi-annual dividends and no dividend tax in Singapore, S-REITs are thus a great sector in which to invest.
Structural overview of REITs: REITs pool funds from investors through an IPO, whose units are then offered to the public. The pooled funds are used to acquire and manage a portfolio of income-generating properties and leased out to tenants. The rental income is distributed back to investors via dividends. REITs are managed by the REIT manager which sets and executes the strategic direction of the REIT, charging a management fee (base + performance).
Steps to analysing REITs:
1) Understanding the REIT's business and portfolio - REIT type, sector focus, property portfolio quality and diversification
- sector risks and opportunities
- alignment with investment goals and risk tolerance
- quality of assets (e.g. prime location), geographic diversification, tenant mix, occupancy rate, weighted average lease expiry, rental reversion
2) Financial health and performance - key financial metrics, dividend analysis, and debt/leverage
- funds from operations, net asset value, net property income, property yield
- dividend per unit, dividend yield, payout ratio, dividend growth track record
- gearing (S-REITs have leverage limit of 50%)
- interest coverage ratio, credit rating, debt expiry profile
3) Management team
- track record, sponsor and fee structure
4) Macroeconomic and market factors
- interest rate (borrowing cost)
- economic conditions, regulatory environment, trends
5) Risk
- taxes, refinancing risk, leverage risk, concentration risk etc.
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