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Singapore REITs (S-REITs) were once the darling of the Singapore stock market, blending property investment with the allure of a steady stream of income. However, the US Federal Reserve’s aggressive stance in raising interest rates from mid-2022 to 2023 has put a damper on its status in recent years. Aside from the rise in borrowing costs for funding new and existing property acquisitions, an increasing uncertain geopolitical environment and changes in structural trends further affected REITs in the office, logistics and data centres, and retail sectors. This led to a price correction, with the overall S-REIT sector trading at an attractive price-to-book ratio of around 0.78. Additionally, the REIT sector offers an attractive average dividend yield of 7.1% compared to the MAS benchmark 10-year government bond at 2.7%. While existing pressures may continue to affect the S-REIT sector, 2024 may present a turning point, with the Fed signalling a cut in interest rates over the course of the year. Singapore’s REIT market, which has a combined market capitalisation of $100 billion as of January 2024, is the largest in Asia (ex-Japan). The 42 REITs and property trusts listed on the SGX also represent 12% of Singapore’s stock market, with 7 of the REITs also featuring as constituents of the Straits Times Index (STI). The high interest rates and changing market conditions had affected some REIT sectors, causing an increase in the aggregated leverage ratio as property valuations fell. Among them, 6 REITs had either halted or significantly halted their distributions in 2023. These are Dasin Retail Trust, EC World REIT, Keppel Pacific Oak US REIT, Lippo Malls Indonesia Retail Trust, Manulife US REIT, and Prime US REIT. Looking at the chart below, the strong push towards the year-end helped the iEdge S-Reit Index eke out a positive return of around . On the other hand, the STI, which consist of the 30 largest stocks in Singapore was only up 4.7% in 2023. Meanwhile, the MSCI World REITs Index, which tracks across 23 developed markets increased by This shows that despite the challenges faced by S-REITs in 2023, they not only outperformed the overall Singapore market but also demonstrated comparable performance to the global REIT sector. The two of the three best-performing REITs have a significant property presence in the United States, specifically in the data centre and retail sectors. On the other hand, the longer-established Mapletree Industrial Trust not only offers diversified exposure to different types of properties but also across different geographical locations. The best performer – Digital Core REIT – is a pure-play exposure to data centres with 12 properties spanning largely across the United States and Canada. It maintained an overall occupancy rate of 97% of its properties, with a weighted average lease expiry (WALE) of 2.8 years. Following in second, United Hampshire US REIT is Asia’s first US grocery-anchored shopping centre and self-storage REIT. It has 22 properties across eight states in the East Coast region of US. It maintained a 97.4% occupancy rate for its properties with a long WALE of 7.1 years. Coming in third, Mapletree Industrial Trust has a more diversified property portfolio that includes data centres, hi-tech buildings, business park buildings, flatted factories, stack-up/ramp-up buildings and light industrial buildings. This comprises 56 properties in North America, 85 properties in Singapore, and its recent acquisition of a data centre in Japan in May 2023. The REIT has a occupancy rate of 92.6% as of December 2023 with a WALE of 4.4 years. A similarity shared by the three of the worst-performing REITs is their exposure to overseas property assets, compared to none locally. They also have a gearing ratio above 40% as of December 2023, with all three halting their distributions during the year. The worst performer, Dasin Retail Trust has 7 retail malls in China. It halted its distributions in 2023 as it defaulted on around $910 million in loans. It continues to receive debt collection notice in 2024 from former officers of the company or their associates as it attempts to restructure its obligations with bondholders. Following closely in second place is Manulife US REIT, dubbed the first pure-play US Office REIT. It has 10 freehold office properties across the US states that were severely impacted by the Covid-19 pandemic. It halted its distributions after a breach in loan covenants caused its property valuations to drop. Manulife US REIT recently announced its recapitalisation plan that was approved by unitholders with the intention to recover in the next two to three years, possibly coinciding with the recovery of the US office market. Coming in third is Lippo Malls Indonesia Retail Trust (LMIRT), which has 22 shopping malls and 7 retail spaces in Indonesia. In March 2023, it announced the suspension of distributions to unitholders in an attempt to conserve capital and cash resources to focus on addressing debt obligations. This was recently followed by Fitch Ratings, which placed LMIRT’s long-term issuer default rating at “CCC-”. This underscores LMIRT’s potential to default in lieu of acceptance by investors of its tender offer over the debt exchange. It's free! Don't miss out on the latest financial market movements. FSMOne aims to help investors around the world invest globally and profitably, follow for bite-sized finance analyses and exclusive happenings.