What is a REIT?
A real estate investment trust, abbreviated as REIT, is an organisation engaged in managing commercial estate ventures and properties. These ventures and properties may include office structures, apartments and private residences, warehouses, hospitals, shopping malls, hotels etc. Real estate investment trusts are also usually involved in the process of securing capital for use in the renovation or purchase of properties. A real estate investment trust may be listed on a stock exchange or operate as a non-listed public and private entity. Furthermore, a REIT may be characterised as an equity REIT, a mortgage REIT, a private REIT, or a public non-listed REIT. Private REITs are not listed on a public stock exchange; consequently, they cannot sell shares or securities on public stock exchanges. Apart from these groups, REITs may be classified into the following groups: retail, residential, healthcare, office, and mortgage REITs.
How to Start Investing in REITs
Statistically, real estate investment trusts represent immensely profitable opportunities due to the fact that they generate regular returns on investments. A three-year dataset published by Investopedia showed that real estate investment trusts averaged a return rate of 11.25% between November 2017 and November 2020. This statistic points toward the profitability of REITs.
There are two modes of investing in REITs. In the first instance, investors can purchase shares and securities of individual REITs. However, this is subject to having a brokerage account. A brokerage account guarantees access to purchase and sell securities, exchange-traded funds and shares on a public stock exchange like the Singapore Stock Exchange. In Singapore, an investor is also required to have a CDP (Central Depository Account) account to be able to invest in a real estate investment trust.
Alternatively, investments in REITs can be made by purchasing a REIT ETF or by investing in a REIT-owned portfolio through an automated online financial services application like Syfe. In the case where the investment proceeds through the REIT ETF route, the investor is afforded the luxury of choosing between the following REIT ETFs available on the Singapore Stock Exchange: Lion-Philip S-REIT ETF, NikkoAM-Straits Trading Asia Ex-Japan REIT ETF, Philip SGX APAC Dividend Leaders REIT ETF, CSOP iEdge S-REIT Leaders ETF and UOB Asia Pacific (APAC) Green REIT ETF. This mode of investment also requires ownership of a brokerage account for direct purchases from the Singapore Stock Exchange.
What are REIT ETFs
REIT ETFs (or real estate investment trust exchange-traded funds) are companies with a portfolio of profit-yielding assets spread across various real estate investment sectors. These companies are listed on public stock exchanges. As such, their portfolio is primarily in the form of shares and securities. REIT ETFs plough funds aggregated from investors into shares and securities issued by real estate investment trusts. This accords them with a diversified portfolio of investments and opportunities. As of the time of making this publication, only 5 REIT ETFs were listed on the Singapore Stock Exchange: UOB Asia Pacific (APAC) Green REIT ETF, Philip SGX APAC Dividend Leaders REIT ETF, Lion-Phillip S-REIT ETF, NikkoAM-Straits Trading Asia Ex-Japan REIT ETF and CSOP iEdge S-REIT Leaders ETF. These companies manage assets spread across different sectors with the additional offering of low-cost investment opportunities for investors.
Types of REITS You Can Invest in SINGAPORE
The Singaporean REIT sector is populated by numerous real estate investment trusts with investment holdings in various sectors of Singapore’s economy. REITs in Singapore are of seven broad types, namely: healthcare, commercial, industrial, hospitality, retail, residential and equity REITs.
– Healthcare REITs
Investment trusts who find themselves in the healthcare sector have their investment holdings in the form of healthcare infrastructure and facilities. These facilities encompass hospitals and nursing homes, and elderly care centres. First, REIT and ParkwayLife REIT, two major players in this sector of real estate investment, count among their assets hospitals and nursing homes. It is projected that Singapore’s demographic trends and the impact of the coronavirus pandemic guarantees this sector’s sustained profitability in the long run.
– Commercial REITs
Commercial REITs hold investable assets in the form of office buildings and related infrastructure. This sector is dominated by REITs with transnational and intercontinental reach. Notable players in this sector hold assets and investment footprints in countries such as Germany, Spain, France, the United States, Australia, South Korea, China and Hong Kong. Examples of such players include CapitaLand Integrated Commercial Trust, Elite Commercial REIT, IREIT Global, Keppel REIT, Lendlease Global Commercial REIT, Mapletree Commercial Trust, Prime US REIT and Suntec REIT. More than 70% of these companies are publicly listed on the Singapore Stock Exchange (SGX). According to statistical data by the Singapore Stock Exchange published in 2021, this sector represents a leading REIT sector. Within the period captured by the data, commercial REITs like IREIT Global posted a market capitalisation of S$606 million with a total return rate of 13% and a dividend yield of 7.4%.
– Industrial REITs
Industrial REITs own and manage investible assets in the form of warehouses, manufacturing centres, logistics facilities and distribution centres etc. Like their counterparts in the commercial sector, major players in this subset of the REITs industry also possess transnational and intercontinental investment footprints: companies like AIMS APAC REIT, Ascendas REIT, ARA Logos Logistics Trust, ESR-REIT, EC World REIT and Mapleetree Logistics assets hold logistics centres and warehouses in Singapore, Australia, the United Kingdom, the United States, China, the Netherlands, Germany, South Korea, Japan, Hong Kong, Vietnam and Malaysia.
– Hospitality REITs
Hospitality REITs concentrate their portfolio on tourism-related properties like hotels. This subset of REITs represents one of the leading sectors in Singapore, according to the Singapore Stock Exchange data for 2021. Dominant players in this sector also boast of transnational and intercontinental portfolios. The Ascott Residence Trust, for instance, operates in Australia, Belgium, France, Germany, Indonesia, Malaysia, Japan, Philippines, South Korea, Spain, the United States, the United Kingdom and Vietnam, in addition to Singapore. CDL Hospitality Trusts, another renowned name in the sector, operates in the United Kingdom, Japan, Germany, New Zealand, The Maldives and Italy, in addition to Singapore.
– Retail REITs
Retail REITs in Singapore own and manage assets like shopping malls, centres and complexes. Key players in this sector have a reduced reach, unlike their peers in the industrial and commercial REIT sectors. With a few exceptions, these REITs are focused on or originated from South East Asia. Trust funds such as BHG Retail REIT, CapitaLand Retail China Trust, Dasin Retail and Lippo Malls Indonesia Retail Trust operate in China and Indonesia. However, this sector represents also represents a leading REIT sector, with some companies recording double-digit gains and yields above 7% in 2021.
– Residential REITs
Residential REITs typically own and manage residential buildings and facilities. This is a large developing REIT sector in Singapore. This derives significantly from the absence of a wide field of market players. Investors keen on building a portfolio in this sector may consider a company such as Ascott Residence Trust or Sazen REIT.
– REIT ETFs
The Singaporean real estate investment trust (REIT) exchange-traded funds (ETFs) sector has attracted significant financial outlays since its introduction in 2016. According to the Singapore Stock Exchange (SGX), the sector is home to regional REIT-ETFs heavyweights in the form of NikkoAM-StraitsTrading Asia ex-Japan Reit ETF and the Lion-Phillip S-Reit ETF. According to data from the Singapore Stock Exchange, these companies account for more than S$50 million in net outflows in the first two quarters of 2021.
What Kind of Returns Can You Get From REITS?
Commentaries from various Singaporean financial intelligence and economic analysis sites indicate that the REITs sector is evolving into a massive industry on its own. Already, as reported by Bloomberg, Singaporean REITs are doubling investment portfolios overseas. This is apart from These statistics, along with the generally impressive performances on the Singapore Stock Exchange, shape up the REITs sectors as a profitable investment venture.
REITs represent attractive investment channels for the fact that they offer steady streams of income and returns on investment. REITs typically disburse more than 80% of taxable income through the payment of dividends to investors. Per the Singapore Stock Exchange, REITs in Singapore rake in a profit yield of 7.0% and a total annual return of up to 34%, with office and industrial REITs taking the lead.
More FAQs About REIT?
What is a CDP account, and how do I open one?
A Central Depository Account is an account that an individual investor uses for buying shares, securities and exchange-traded funds on the Singapore Stock Exchange. The general requirements for opening a CDP account include the following: meeting the minimum age requirement of 18, having no bankruptcy history and having an existing bank account with a specified Singaporean bank. Qualified persons can be allowed to open a CDP account using any of the following three methods: by opening a brokerage account, through MyInfo portal or online with the CDP Customer Service Centre.
Are all REITs in Singapore listed on the Singapore Stock Exchange?
All REIT ETFs operating in Singapore are listed on the Singapore Stock Exchange. However, some REITs may not be listed, particularly private REITs.