Top 10 Singapore REITs that made you money if you invested from their IPOs (Updated 2024)

Driven by rapid interest rate hikes starting in the second half of 2022, Singapore REITs (S-REITs) saw a significant sell-off that peaked in late 2022. Despite a brief recovery in early 2023, a fresh wave of selling pressure sent the sector tumbling back into negative territory by October 2023. This was due to many S-REITs reporting lower distribution per units (DPUs) after renewing their maturing loans at higher interest rates. The sector has recently rebounded again, but there are concerns once again about more negative impact when lower rate loans mature in 2024.

S-REITs that were particularly hit the hardest were office REITs with assets based in the U.S. such as Manulife US REIT, Prime US REIT, and Keppel Pacific Oak Trust. The pandemic has fundamentally altered the landscape of how Americans work, with a significant preference emerging for remote work arrangements. This shift has led to decreased demand for office space, exacerbating the ongoing surplus of available office properties. Consequently, the valuation of office real estate in the US has begun to plummet as a result.

Due to lower property valuations, Manulife REIT breached its loan covenants, with its gearing level surpassing the regulatory limit of 50% to reach 57%. Consequently, the REIT was compelled to seek a recapitalization plan and initiate the sale of some assets in order to salvage its financial position.

With REITs underperforming, income investors sought refuge in safe-haven investments like Singapore Savings Bonds and short-term Treasury bills. However, with rates anticipated to decline in 2024, investing in REITs at their currently low valuations may potentially yield superior returns in the medium to long term.

Despite the recent underperformance of REITs over the past two years, it remains crucial to evaluate their long-term performance, as we have consistently emphasized year after year. If we focus solely on month-to-month or year-to-year performance, we might overlook the forest for the trees.

Long-term performance of Singapore REITs

We first wrote about the long-term returns of S-REITs eight years ago. So once again, we will revisit their performance by taking into account the latest share prices as of 31 December 2023 and distributions paid out to unitholders up to same period.

Despite the relatively short history of S-REITs, some have been listed during periods when the Fed Funds Rate rose to over 5% (from 2004 to 2007), similar to our current scenario. Analysing the performance of S-REITs during that period can provide valuable insights into their potential performance in the coming years.

To accurately assess their long-term performance, REITs should have a listing record of at least 10 years. This year, three more REITs have reached the 10-year listing mark, including OUE Commercial REIT, Frasers Hospitality Trust, Keppel DC REIT, and IREIT Global, all of which were listed in the year 2014. I also make adjustments, such as pre-consolidated units and distributions, to get a more accurate picture of S-REITs’ long-term performance.

Once again, we will assume that John (a fictional character) invests $1,000 in each of these REITs equally from the day the REIT listed. Since John is a hard-core income investor and wants to keep all his cash, he doesn’t want to come out with any more money to subscribe to rights issuances (if any) and is prepared for any share dilution. Let’s also assume that John also forgets to sell his nil-paid rights from which he can obviously make a profit from.

For example, if John invested in Mapletree Logistics Trust (MLT) during its IPO, his initial investment of $1,000 would’ve grown to $1,560 (+156% in capital gains) as of 31 December 2023. On top of that, he would have collected total dividends of $2,010 (+201% in distributions).

From the table above, John would’ve made a nice return in MLT as his initial investment of $1,000 would have grown to $4,570 (+357% in total return), including the dividends received over the years. If John invested $10,000, then his investment would’ve grown to $45,700. Similarly, $100,000 will turn into $457,000. Basically, the more money he invests, the more he makes. And the longer he holds, the more dividends he will receive. All in all, his compound annual growth rate (CAGR) from MLT alone is 8.81% from July 2005 to December 2023. So after investing for more than 10 years, here are the top 10 best-performing S-REITs for John.

Note: We’ve excluded brokerage costs, currency exchange gains/losses and taxes that might be applicable to foreign investors.

10. CDL Hospitality Trust (CAGR: +6.98%) 

Since 2006, every $1,000 investment in CDL Hospitality Trust would’ve turned into $1,340. Including the dividends, every $1,000 would cumulatively become $3,150. 

9. CapitaLand Ascott REIT (CAGR: +7.10%) 

Since 2006, every $1,000 investment in Ascott REIT would’ve turned into $1,460. Including the dividends, every $1,000 would cumulatively become $3,210.

8. CapitaLand Integrated Commercial Trust (CAGR: +7.28%)

Since 2002, every $1,000 investment in CICT would’ve turned into $2,150. Including the dividends, every $1,000 would cumulatively become $4,380. 

7. Frasers Centrepoint Trust (CAGR: +8.34%)

Since 2006, every $1,000 investment in FCT would’ve turned into $2,190. Including the dividends, every $1,000 would cumulatively become $3,900. 

6. Mapletree Logistics Trust (CAGR: +8.81%) 

Since 2005, every $1,000 investment in MLT REIT would’ve turned into $2,560. Including the dividends, every $1,000 would cumulatively become $4,570.

5. CapitaLand Ascendas REIT (CAGR: +9.36%)

Since 2002, every $1,000 investment in Ascendas REIT would’ve turned into $3,440. Including the dividends, every $1,000 would cumulatively become $6,540. 

4. Mapletree Pan Asia Commercial Trust (CAGR: +9.45%) 

Since 2011, every $1,000 investment in Mapletree Comm would’ve turned into $1,780. Including the dividends, every $1,000 would cumulatively become $2,960. 

3. Parkway Life REIT (CAGR: +9.53%) 

Since 2007, every $1,000 investment in Parkway Life REIT would’ve turned into $2,870. Including the dividends, every $1,000 would cumulatively become $4,290. 

2. Mapletree Industrial Trust (CAGR: +11.83%)

Since 2010, every $1,000 investment in MIT would’ve turned into $2,700. Including the dividends, every $1,000 would cumulatively become $4,280. 

1. Keppel DC REIT (CAGR: +12.31%)

Since 2014, every $1,000 investment in KDC would’ve turned into $2,100. Including the dividends, every $1,000 would cumulatively become $2,840. 

In summary, here is John’s overall performance:

The standout performer in John’s REIT portfolio, based on absolute return, is CapitaLand Ascendas REIT, being one of the longest listed REITs in Singapore. Every $1,000 investment in CapitaLand Ascendas REIT would’ve turned into $6,540! His net gain in Ascendas REIT alone is more than enough to cover his losses in Frasers Hospitality Trust, IREIT Global, OUE Commercial REIT, LMIR Trust, and MacarthurCook Industrial REIT.

Despite not having to provide any additional capital to subscribe to rights offerings, John remains highly profitable. However, had he opted to subscribe to them, including excess rights, he could have potentially increased his profits further, as rights are typically offered at a significant discount.

While this year’s overall performance has slightly declined compared to last year, dividends have remained consistent. Remarkably, dividends accounted for 81% of the total return, highlighting the significant contribution of regular dividends to John’s overall returns from his REIT investments.

The fifth perspective

Indeed, at the end of the day, John continues to receive dividends from his S-REITs regardless of market conditions. This steady income stream from dividends provides John with a reliable source of passive income, helping to stabilize his investment portfolio and mitigate the impact of market fluctuations.

However, please note that making investment decisions solely based on past performance is not advisable, as past results are not indicative of future outcomes. Instances like the bankruptcy of Eagle Hospitality in 2021 (listing record of only two years) and the challenges faced by Manulife REIT, highlight the variability among REITs.

Particularly in a high-rate environment, having a sound investment process is crucial to identify and invest in high-quality REITs. These are the ones likely to thrive in the face of high interest rates while providing investors with a consistent stream of passive income and potential capital gains in the long term.

Announcement! Enrolment to join Dividend Machines is open until 17 March 2024, 11:59PM. If you’re looking for a way to learn how to invest in dividend stocks and REITs and build multiple streams of passive dividend income, then we highly recommend you check out Dividend Machines before applications close! Once the deadline has passed, Dividend Machines will only reopen in 2025. So if you miss this round, you’ll have to wait a year (or more) before we accept new applications again.

Happy investing and we hope to see you on the inside! 😊