Last month, investors in Singapore saw one of the steepest sell-offs of a real estate investment trust (REIT) in recent memory.
First Real Estate Investment Trust (SGX: AW9U) slid more than 10% in just two days as reports about the financial health of its main tenant, Lippo Karawaci Tbk PT spooked investors.
REITs are often considered more stable investments than stocks because their rental income is usually more consistent and they tend to have fewer business risks than traditional companies. Because of these reasons, a large decline in a REIT’s unit price, such as First REIT’s, is a rare occurrence.
That being said, the decline in price now means that investors who are willing to take some risks with First REIT can buy in at a much lower price. As the yield of a REIT is a function of its price, it also means that investors who buy now will also enjoy a much higher distribution yield than if they had bought it just a week earlier. First REIT now sports the fifth highest yield among REITs in Singapore.
With that in mind, I thought it would be useful to give investors a list of the top three REITs with the highest year-to-date annualised yields in Singapore.
Lippo Malls Indonesia Retail Trust (SGX: D5IU)
Top on the list is another REIT that is linked to Lippo Karawaci. Like First REIT, Lippo Malls Indonesia Retail Trust has fallen hard in recent months. Year-to-date, the REIT has shed more than 40% of its value amid concerns over its sponsor.
The falling Indonesian Rupiah has not helped either and is another factor that has caused distributions to be lower for local investors.
Lippo Malls Indonesia Retail Trust currently has an annualised yield of 12%.
Cache Logistics Trust (SGX: K2LU)
With an annualised yield of 9%, Cache Logistics Trust comes in at second place. It invests primarily in logistics warehouse properties located in Singapore, Australia, and China.
The trust has been suffering from higher foreign exchange losses this year, largely due to the weaker Australian dollar. Consequently, its net income has slid 7.1% between January to September this year, compared to last year. Its distribution per unit has also declined 12%, which has resulted in its unit price falling almost 20% so far this year.
EC World Real Estate Investment Trust (SGX: BWCU)
Third on this list is EC World REIT with its annualised yield of 8.8%. It invests in specialised and e-commerce logistics properties in China. So far this year, the REIT has been doing well with gross revenue and distributable income up 2.9% and 3.0% respectively. It made its first acquisition last year, expanding its property count to seven, which was part of the reason for the improved performance this year.
The Foolish bottom line
Fears of rising interest rate and geopolitical risk have caused a broad market sell-off this year. The falling stock market has resulted in REITs in Singapore currently sporting much higher yields than they did last year.
That being said, the yield of a REIT is not the only aspect that investors should look out for. What is perhaps more important is the stability of distributions and whether the REIT can grow over time. Investors should consider things like concentration risk, gearing, and interest cover when assessing the stability and growth potential of a REIT.
$First Reit(AW9U.SI) $EC World Reit(BWCU.SI) $Lippo Malls Tr(D5IU.SI) $Cache Log Trust(K2LU.SI)
The Top 3 Yielding REITs in Singapore Now
Here are the top 3 yielding REITs right now.