OREANDA-NEWS. There are 28 Real Estate Investment Trusts (REITs) and six stapled trusts listed on the Singapore Exchange (SGX). Five of these are categorised to Office REITs according to the Global Industry Classification Standard (GICS®). Office REITs are companies or trusts engaged in the acquisition, development, ownership, leasing, management and operation of office properties.

The five Office REITs have a combined market capitalisation of S\\$10.0 billion, and trade at an average price-earnings ratio of 8.4. They also maintain an average dividend yield of 5.3%. This compares with the Singapore Fixed Income (SFI) Index yield of around 2.98%.

Aside from dividend yields, location and type of real estate assets, investors can view REITs according to their aggregate leverage ratio and the tenure of debt. The aggregate leverage ratio is the ratio of the total debt over deposited properties, where deposited properties amount to the total asset value of a trust. These ratios vary across the REIT Sector.

The five Office REITs averaged an aggregate leverage ratio of 36.0% as of the quarter ended 31 March 2015, 1.6% higher than the average for the seven Industrial REITs, as highlighted in a previous market update. Of the five, the three trusts with the highest ratios were Keppel REIT, OUE Commercial Real Estate Investment Trust, and Frasers Commercial Trust.

On 2 July 2015, the Monetary Authority of Singapore (MAS) implemented some changes on the leverage limits of REITs. The leverage limit imposed on a REIT was increased to 45% from 35% of the REIT’s total assets, but the REIT is no longer allowed to leverage up to 60% with a credit rating.  These changes will provide a REIT with greater operational flexibility to rejuvenate its maturing portfolio of assets.

The five trusts averaged a price decline of 4.6% in the year thus far, and a negative dividend-adjusted return of 2.0%; this brought their one-year total return to 2.9%. In terms of dividend-boosted returns, the best performers year-to-date were Frasers Commercial Trust (+12.0%), OUE Commercial Real Estate Investment Trust (+0.3%), and IREIT Global (-5.0%).

CapitaLand Commercial Trust

CapitaLand Commercial Trust is a unit trust that invests in real estate and real estate-related assets, which are primarily used for commercial purposes in Singapore. Its portfolio primarily consists of office buildings and transport facilities, including Capital Tower, 6 Battery Road, HSBC Building, StarHub Centre, Robinson Point, Bugis Village, Golden Shoe Car Park, and Market Street Car Park. The trust was founded in 2004 and is based in Singapore. CapitaLand Commercial Trust is due to release its earnings for the quarter ended 30 June 2015 next Friday.

Keppel REIT

Keppel REIT is a real estate investment trust that invests in the real estate markets of Singapore and Asia. It primarily makes investments in commercial properties. Keppel REIT was formed in 2006 and is headquartered in Singapore. Keppel REIT is due to release its earnings for the quarter ended 30 June 2015 next Monday.

Frasers Commercial Trust

Frasers Commercial Trust invests in a diverse portfolio of real estate and real estate-related assets, primarily focusing on office and retail sectors. It owns properties in Singapore, Japan, and Australia. The company was founded in 2005 and is based in Singapore. Frasers Commercial Trust is due to release its earnings for the quarter ended 30 June 2015 next Monday.

OUE Commercial Real Estate Investment Trust

OUE Commercial Real Estate Investment Trust invests in a portfolio of commercial properties in the financial and business hubs of Singapore and beyond. Its properties are primarily used for office and/or retail purposes, and its portfolio comprises two commercial properties in Singapore and Shanghai. OUE Commercial Real Estate Investment Trust was incorporated in 2013 and is based in Singapore.

IREIT Global

IREIT Global is the first SGX-listed REIT established with the aim of principally investing, directly or indirectly, in a portfolio of income-producing properties in Europe used primarily for office purposes. Its portfolio consists of four major properties in Germany. IREIT Global was listed in August 2014 and is headquartered in Singapore.