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Ever since the US Federal Reserve (Fed) raised interest rates at an unprecedented pace starting March 2022, S-REITs faced a triple-whammy – hurting investor interest in the asset class. For a start, higher risk-free interest rates made Government T-bills and Singapore Savings Bonds (SSB) more attractive investments. Even today, T-bills and Singapore Savings Bonds (SSB) are paying close to 3.5% p.a. Consequently, most S-REITs prices tanked. A lower price meant that S-REITs offered a better yield even if they paid the same distribution per unit. However, being relatively highly leveraged themselves, higher interest rates also translated into higher borrowing costs for S-REITs. This meant that S-REITs could not continue to pay the same distributions. Hence, S-REITs price corrections had to be even steeper to offer an attractive enough yield. Finally, higher interest rates also impeded growth for S-REITs. Finding acquisitions that would be yield-accretive for unit holders became challenging as the borrowing cost was higher and investor were expected high yields. Now, the Fed has strongly hinted at interest rate cuts in the coming months, everything may change. There are a total of 41 REITs and property trusts listed in Singapore. Together, they make up $87 billion in market capitalisation – which represents 13% of Singapore’s stock market. Overall, S-REITs are trading at a relatively attractive average Price-to-Book (P/B) value of 0.73, and a dividend yield of 8.1%. S-REITs also offer diversified property sub-segments exposure, including to Diversified REITs (25%); Retail REITs (20%); Industrial REITs (20%); Hospitality REITs (13%); Office REITs (13%); Specialised REITs (5%); and Health Care REITs (5%). Over 90% of the REITs and property trusts in Singapore have overseas asset exposure. Source: To measure the performance of S-REITs broadly, we can look at the iEdge S-REITs Leaders Index – the liquid representation of the S-REITs Market in Singapore. As we can see in the chart below, S-REITs are still trading at a lower price than where they were last year. However, we can also observe a sharp 10% increase in S-REITs prices in the last three months – rising from 1,001.434 to 1,102.468. In comparison, Singapore’s Straits Times Index (STI) has only risen 1.7% in the same three-month timeframe. Moreover, we should also note that there are seven S-REITs also listed on the STI – providing a buoy on the index. Source: As we can see in the table below, most S-REITs suffered negative returns in YTD 2024. In turn, this has likely increased its dividend yield. However, must ascertain whether the higher, and seemingly “juicy” yields are sustainable and worth the risk.   BHG Retail REIT – 5.6% Cromwell European REIT – 4.4% Sasseur REIT – 0.6% There were only three S-REITs that delivered a positive return in 1H 2024, and all three were holding overseas-based properties. Both BHG Retail REIT and Sasseur REIT are retail REITs with China-based properties. BHG REIT has six retail properties located in major Chinese cities such as Beijing, Chengdu, Hefei, Xining and Dalian. Its properties had a combined committed occupancy rate of 95.6% and a weighted average lease expiry (WALE) of 5.8 years – providing a healthy outlook for its performance in the next six years. It has a gearing ratio of 39.9% – well under the 50% threshold for SGX-listed REITs – and average cost of debt coming up to 5.5%. Cromwell European REIT offers Singapore investors a unique opportunity to invest in over 100 high-quality predominantly freehold properties spanning United Kingdom, Denmark, Finland, France, Germany, Italy, the Netherlands, Poland, the Czech Republic and Slovakia. Cromwell European REIT enjoys a 93.6% portfolio occupancy rate working with over 820 tenants in its properties. Cromwell European REIT also planned ahead, divesting €261 million in properties and maintaining 38.9% net gearing. Sasseur REIT has four outlet malls in China, including two in Chongqing, Hefei, Kunming, and has strengthened portfolio occupancy to 97.8% in 2Q 2024. Sasseur REIT’s strategy is to deliberately manage short leases to optimise tenant mix – and its WALE states at 2.1 years by Net Lettable Area. Keppel Pacific Oak US REIT – 64.3% Dasin Retail Trust – 56.4% Prime US REIT – 45.3% Similarly, all three worth-performing S-REITs owned properties based overseas. Two of them – Keppel Pacific Oak US REIT and Prime US REIT – own US-based office properties; and Dasic Retail Trust in another China-based property owner. Keppel Pacific Oak US REIT owns a property portfolio comprising 13 freehold office buildings across eight key markets in the US. Keppel Pacific Oak US REIT suspended its distributions to unitholders beginning 2H 2023 – and this will continue until 2H 2025. This may be a reason for its share price plunge in 1H 2024. Apart from that, Keppel Pacific Oak US REIT maintained a portfolio occupancy of 90.7% in 1H 2024. Its Aggregate leverage, however, stands at 42.7%. Unlike the two best-performing REITs with Chinese properties, Dasin Retail Trust fell into the worst-performing S-REITs in 1H 2024. This may not be unexpected, as Dasin Retail Trust has been mired by troubles from defaulting on its loans that were announced in 2Q 2023. Nevertheless, its seven malls in China have achieved a combined occupancy rate of 84.5%. Prime US REIT is another S-REIT that owns 13 freehold US office properties. While its portfolio occupancy stands at 83.9%, Prime US REIT has an aggregate leverage of 46.4% – close to the 50% threshold limit. Nevertheless, it is the only one (out of three) S-REITs that own high-quality US office buildings to be still paying a distribution to its unitholders – albeit less than 90%, with the amount retained to be used to fund capital expenditure on properties and pare down borrowings. With over 25,000 subscribers, has expanded since 2020 to bring you more than just market insights, updates on sector and stock performances, plus all the happenings in Singapore's securities market, tailored for individual investors like you.