What Makes A Great REIT

November 20, 2021

Now that we have covered more ground on REITs, it is time to delve into what makes a REIT great. By definition, it would be the allure of its high distribution yield because REITs are required to pay 90% of their annual income as dividends. Hence it can be said that they offer some of the best returns in the market, making them a top choice for investors seeking steady income stream.

But hold your horses – it goes beyond what we see on the surface. Generous dividends look good on paper, but what if a high distribution yield came with the risk of collapsed share prices later on, which could in turn signal at future dividend cuts? That would not be ideal if you are in it for the long run (as you should be).

Now, let’s take a look at the Top 10 Singapore REITs over the past 10 years. One takeaway is clear: Investors should not fixate on the dividend yield and look harder at the fundamentals instead.

Table Source: https://www.prosperus.asia/sg-market/the-top-10-singapore-reits-over-the-past-10-years/

The top five S-REITs (in terms of annualised total returns) were Mapletree Industrial Trust, Mapletree Logistics Trust, Mapletree Commercial Trust, ParkwayLife Reit and Aims Apac Reit; they were also among Asia-Pacific’s 20 best performing REITs with a longer trading history.

“Three of these are S-REITs backed by Mapletree Investments, which owns and manages a diverse mix of data centres, industrial, lodging, logistics, mixed-use, multifamily, office, residential and retail properties. Among them, Mapletree Industrial Trust listed in October 2010 with an initial investment portfolio of 70 industrial properties in Singapore. Today, the trust has tripled its portfolio across 114 properties in Singapore and North America, with the latest acquisition of 29 data centres in the United States.

ParkwayLife Reit listed in August 2007 with just three properties in Singapore – Mount Elizabeth Hospital, Gleneagles Hospital and East Shore Hospital. In just 14 years, it has almost trebled its portfolio value with 53 properties in Singapore, Japan and Malaysia.”

Instead of just looking at the dividends, a truly savvy investor would choose to focus on REITs that have quality assets and management. It is also important to observe if they are making strategic long-term moves, such as acquiring properties in the right growth sectors.