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3 Singapore REITs That Can Tide You Through a Recession

·4-min read
Chinese Family in Mall
Chinese Family in Mall

It’s a good idea to include a mix of growth and dividend stocks within your investment portfolio.

The growth stocks provide the portfolio with long-term capital appreciation while the dividend ones provide a steady stream of passive income.

When it comes to dividends, REITs are an asset class that pays out a flow of dependable distributions.

What’s more, owning strong, well-managed REITs means you can enjoy a peaceful night’s sleep even if the economy takes a sudden dip.

You should look out for REITs with favourable characteristics such as a strong sponsor, a good track record of increasing distributions, and with quality assets that can withstand downturns.

Here are three recession-resistant REITs you can add to your watchlist.

Frasers Centrepoint Trust (SGX: J69U)

Frasers Centrepoint Trust, or FCT, is a pure-play Singapore suburban retail REIT with nine retail malls in its portfolio.

Assets under management (AUM) stood at S$6.1 billion as of 31 March 2022 with around 2.3 million square feet of net lettable area.

Popular malls within FCT’s portfolio include Waterway Point in Punggol, Century Square in Tampines, and Causeway Point in Woodlands.

As FCT’s malls are located in suburban areas near the heartlands, they benefit from a steady flow of foot traffic.

54.5% of the REIT’s gross rental income is anchored by essential services that will not be adversely impacted by a recession.

The occupancy rate stood at 97.8% and the malls are also well-connected to public transport.

FCT also has a strong sponsor in Frasers Property Limited (SGX: TQ5) that can provide financial support during tough times if need be.

Shopper traffic has recovered to 73% of pre-COVID levels by April this year.

Tenant sales did even better, coming in at 12% above pre-pandemic levels, signalling that people are spending more despite fewer visits to the malls.

Distribution per unit (DPU) has also steadily risen through the years except for fiscal 2020 (FY2020) (ended 30 September 2020) due to the effects of the pandemic.

For FY2021, DPU has rebounded strongly to S$0.12085 from S$0.09042 the year before.

The first half of FY2022 saw DPU inch up 2.3% year on year from S$0.05996 a year ago to S0.06136.

Aggregate leverage stood at 33.3% as of 31 March 2022, suggesting there is sufficient debt headroom for further acquisitions to boost DPU.

Mapletree Industrial Trust (SGX: ME8U)

Mapletree Industrial Trust, or MIT, is an industrial REIT with 143 properties valued at S$8.8 billion as of 31 March 2022.

54% of the REIT’s AUM comprises data centres while the remainder is made up of business parks, flatted factories, and Hi-Tech buildings.

The REIT’s DPU has been on an upward climb since FY2012, not pausing even during the pandemic.

DPU for FY2022 (ended 31 March 2022) was 10% higher year on year, at S$0.138 versus S$0.1255 the year before.

The reason for this resilience is MIT’s acquisition of data centres in the US in FY2021 and FY2022.

Unitholders will be pleased to know that the industrial REIT also has a strong sponsor in Mapletree Investments Pte Ltd.

Leverage stood at 38.4% with a low cost of debt of 2.4%, opening MIT up for future yield-accretive acquisitions to boost DPU further.

Keppel DC REIT (SGX: AJBU)

Keppel DC REIT is a data centre REIT with a portfolio of 21 data centres across nine countries such as Singapore, the UK, Netherlands, Italy and Germany.

AUM stood at S$3.5 billion as of 31 March 2022.

DPU has been increasing without a pause since the REIT listed back in December 2014, with the most recent FY2021 (ended 31 December 2021) DPU at S$0.09851, up 7.4% year on year from FY2020’s S$0.0917.

It also helps that the REIT is anchored by a strong sponsor in Keppel Corporation Limited (SGX: BN4).

Keppel DC REIT continues to enjoy robust demand for data centres as worldwide spending on data centre IT hardware continued to rise.

Demand will be driven by increased digitalisation and the shift to cloud computing for numerous businesses.

The data centre REIT has also been actively acquiring.

2021 saw a total of four acquisitions by the REIT, and just this month, it announced the purchase of two data centres in Guangdong, China, for S$104 million.

Aggregate leverage stood at 36.1% as of 31 March 2022, with a low cost of debt of just 1.8%.

The REIT has ample opportunities to acquire more than S$2 billion worth of data centres from its sponsor’s pipeline.

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Disclaimer: Royston Yang owns shares of Mapletree Industrial Trust and Keppel DC REIT.

The post 3 Singapore REITs That Can Tide You Through a Recession appeared first on The Smart Investor.

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