Singapore Commercial REITs – An Overview of the Properties They Own

SG-REIT

20 Sep Singapore Commercial REITs – An Overview of the Properties They Own

Real Estate Investment Trusts (REITs) are investment vehicles that pool investors capital to buy properties and collect rental income.

As such, it would be of interest for investors to study the property portfolios of each REIT to identify the underlying properties the REIT owns. Not all properties are equal, they are in different locations, command different rents, and have different clientele. To normalise the differences, we look at the capitalisation rate of each property, and assess the ‘quality’ of the properties. Also, since REITs have to pay out at least 90 percent of the net income as dividends, the capitalisation rate would offer a good indication of the dividend yield for unit holders.

Most investors may not understand capitalisation rate, but it is equivalent to earnings yield of stocks. If you take the reciprocal of it, it becomes the PE ratio.

For example, if a PE of a stock is 15, the earnings yield will be 6.7%. But instead of earnings yield, property investors call it capitalisation rate.

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For your reference, I have gathered the following property portfolio of commercial REITs listed in Singapore and calculated the capitalisation rate and PE multiple for each property the REIT owns.

Disclaimer: Please do not rely solely on these numbers to make investment decisions. Although I have picked out numbers from the annual reports, mistakes may arise.

 

Suntec REIT

Suntec REIT

The capitalisation rate seems to be lower than most other REITs. There is a challenge to break down the capitalisation rate between the office and retail spaces. Office rents are lower than the retail rents. Moreover Suntec City had asset enhancements in the past few years and that could explain the lower rents.

Suntec REIT is a part owner of Marina Bay Financial Centre (MBFC) and One Raffles Quay. The latter is the worst performer in the portfolio.

 

PropertyLocationValuationNet IncomeCapitalisation RateEarnings Multiple ("PE Ratio")
Suntec CitySingaporeS$5,202mS$172.7m3.3%30
Marina Bay Financial Centre Tower 1 & 2 + MallSingaporeS$1,655mS$76.4m4.6%22
One Raffles QuaySingaporeS$1,228mS$30m2.4%41
Park MallSingaporeS$411.8mS$18.9m4.6%22
177 Pacific HighwayAustraliaA$415m---
Total (exlude 177 Pacific Highway)Total (exlude 177 Pacific Highway)S$8496.8mS$298m3.5%29

Capitamall-Trust

CapitaMall Trust

CapitaMall Trust owns most of the most familiar shopping malls in Singapore. Their capitalisation rates are generally higher among the commercial REITs. This is because their portfolio are mainly retail, which command higher rents than office.

IMM’s high capitalisation rate should not be taken at face value as they have a mixture of spaces – office, retail and warehouse.

PropertyLocationValuationNet IncomeCapitalisation RateEarnings Multiple ("PE Ratio")
Tampines MallSingaporeS$922mS$55m6.0%17
Junction 8SingaporeS$662mS$40.7m6.1%16
Funan DigitaLife MallSingaporeS$361mS$21.7m6.0%17
IMM BuildingSingaporeS$603mS$50.3m8.3%12
Plaza SingapuraSingaporeS$1224mS$66.6m5.4%18
Bugis JunctionSingaporeS$951mS$53.9m5.7%18
Sembawang Shopping Centre and Rivervale MallSingaporeS$222mS$14.4m6.5%15
JcubeSingaporeS$335mS$15.9m4.7%21
Lot One Shoppers' MallSingaporeS$503mS$29.5m5.9%17
Bukit Panjang PlazaSingaporeS$292mS$17.1m5.9%17
The [email protected]SingaporeS$728mS$37.8m5.2%19
Clarke QuaySingaporeS$371mS$23.1m6.2%16
Bugis+SingaporeS$337mS$22.4m6.6%15
Raffles City (40%)SingaporeS$1243.8mS$68.1m5.5%18
Westgate (30%)SingaporeS$328.2mS$13.6m4.1%24
TotalTotalS$9083mS$503.1m5.8%18

Frasers Centrepoint Trust

Frasers Centrepoint Trust

You would realise the malls always end with a “point” and they are your heartland malls. Changi City Point is the latest mall and it did not have a full year income and hence we excluded it from the total capitalisation rate for Frasers Centrepoint Trust.

 

PropertyLocationValuationNet IncomeCapitalisation RateEarnings Multiple ("PE Ratio")
Causeway PointSingaporeS$1058mS$56.5m5.3%19
NorthpointSingaporeS$655mS$36m5.5%18
Bedok PointSingaporeS$120mS$6.2m5.2%19
YewTee PointSingaporeS$168mS$9.6m5.7%18
AnchorpointSingaporeS$93mS$4.7m5.1%20
Changi City Point (3 months of income)SingaporeS$306mS$5.2m1.7%59
Total (exclude Changi City Point)Total (exclude Changi City Point)S$2094mS$113m5.4%19

StarHill Global REIT

Starhill Global REIT

This is one of the favourite and most well known REITs among the investors whom I have met. They owned the prestigious Ngee Ann City and Wisma Atria in the Orchard road shopping belt.

Besides Singapore properties, the REIT has several Japanese properties which are performing badly.

PropertyLocationValuationNet IncomeCapitalisation RateEarnings Multiple ("PE Ratio")
Wisma AtriaSingaporeS$962mS$49.3m5.1%20
Ngee Ann CitySIngaporeS$1074mS$53.45.0%20
Starhill GalleryKuala LumpurS$262mS$18.3m7.0%14
Lot 10Kuala LumpurS$166mS$11.1m6.7%15
David Jones BuildingPerthS$150.6mS$11.2m7.4%13
Plaza ArcadePerthS$57.5mS$3.5m6.1%16
Renhe Spring ZongbeiChengduS$81.7mS$8.3m10.2%10
DaikanyamaTokyoS$14.2mS$0.3m2.1%47
Ebisu FortTokyoS$37.3mS$1.4m3.8%27
Harajyuku SecondoTokyoS$3.8mS$0.1m2.6%23
Holon LTokyoS$11.7mS$0.5m4.3%23
NakameguroTokyoS$4.9mS$0.2m4.1%25
Roppongi TerzoTokyoS$29.4mS$0.3m1.0%98
TotalTotalS$2855mS$158m5.5%18

SPH REIT

SPH REIT

This is the newest retail REIT and only have two properties in the portfolio.

PropertyLocationValuationNet IncomeCapitalisation RateEarnings Multiple ("PE Ratio")
ParagonSingaporeS$2588mS$136.7m5.3%19
Clementi MallSingaporeS$571mS$29.2m5.1%20
TotalTotalS$3159mS$165.9m5.3%19

CapitaCommercial-Trust

CapitaComm Trust

CapitaGreen is a new building and has yet to contribute income to the REIT. Bugis Village has a fantastic capitalisation rate. The properties are different from the Grade A office as Bugis Village is a row of conservation shophouses opposite of Bugis Junction. A mix of retail shops at level 1 and office in other levels. However, it is not a big piece of property that could make a big difference to profits for the REIT.

PropertyLocationValuationNet IncomeCapitalisation RateEarnings Multiple ("PE Ratio")
Capital TowerSIngaporeS$1309mS$48.7m3.7%27
Six Battery RoadSingaporeS$1330mS$51.4m3.9%26
One George StreetSingaporeS$975mS$39.6m4.1%25
Twenty AnsonSingaporeS$431mS$17.2m4.0%25
HSBC BuildingSingaporeS$450mS$20.3m4.5%22
Golden Shoe Car ParkSingaporeS$141mS$9.8m7.0%14
Bugis VillageSingaporeS$55.4mS$9.4m17.0%6
Wilkie EdgeSingaporeS$191mS$8.8m4.6%22
Raffles City (60%)SingaporeS$1865.7mS$102.1m5.5%18
CapitaGreen (40%)SingaporeS$610.4m-S$0.2m0.0%NA
Total (exclude CapitaGreen)Total (exclude CapitaGreen)S$6748.1mS$307.3m4.6%22

Fraser Commercial Trust

FrasersComm Trust

The commercial properties in Singapore are not as prominent and mostly office spaces. It is expected that the capitalisation rates are lower. The Australian properties are more bang for buck relatively.

PropertyLocationValuationNet IncomeCapitalisation RateEarnings Multiple ("PE Ratio")
China Square CentralSingaporeS$579mS$20.3m3.5%29
55 Market StreetSingaporeS$134.2mS$3.7m2.8%36
Alexandra TechnoparkSingaporeS$503mS$22.6m4.5%22
Central ParkPerthS$375mS$24.5m6.5%15
Caroline Chisholm CentreTuggeranongS$233.2mS$19.5m8.4%12
TotalTotalS$1824.4mS$90.6m5.0%20

Keppel-REIT

Keppel REIT

Mainly office spaces and several Australian properties.

PropertyLocationValuationNet IncomeCapitalisation RateEarnings Multiple ("PE Ratio")
Ocean Financial CentreSingaporeS$2560mS$129.5m5.1%20
Marina Bay Financial Centre (33.3%) [Cap rate lower because Tower 3 just acquired]SingaporeS$2930mS$59.3m2.0%49
One Raffles Quay (33.3%)SingaporeS$1228mS$30m2.4%41
Bugis Junction TowersSingaporeS$527mS$16.4m3.1%32
8 Chifley Square (50%)SydneyS$205.9mS$11.4m5.5%18
77 King Street Office TowerSydneyS$139.9mS$9.1m6.5%15
8 Exhibition Street (50%)MelbourneS$194.3mS$13.1m6.7%15
275 George Street (50%)BrisbaneS$213.7mS$16.9m7.9%13
Old Treasury Building Office Tower (50%)PerthS$197mS$10.6m5.4%19
Total (exclude MBFC)Total (exclude MBFC)S$5265.8mS$237m4.5%22

MapleTree Commercial Trust

MapleTree Comm Trust

Properties are concentrated in the Southern part of Singapore. A mixture of retail and office spaces with decent capitalisation rates.

PropertyLocationValuationNet IncomeCapitalisation RateEarnings Multiple ("PE Ratio")
VivoCitySingaporeS$2461mS$135.6m5.5%18
PSA BuildingSingaporeS$735mS$36.5m5.0%20
Bank of America Merrill Lynch HarbourFrontSingaporeS$314mS$13.7m4.4%23
TotalTotalS$3510mS$186m5.3%19

Lippo Malls Indonesia Retail Trust

LippoMall Trust

This REIT offers exposure to retail properties in Indonesia. We can see that the capitalisation rates span a large range, which indicates that locations of the malls command very different rents.

PropertyLocationValuationNet IncomeCapitalisation RateEarnings Multiple ("PE Ratio")
Bandung Indah PlazaBandungS$86mS$9.7m11.3%9
Cibubur JunctionCibuburS$52.5mS$7.4m14.1%7
Ekalokasari PlazaBogorS$44mS$1.1m2.5%40
Gajah Mada PlazaJakartaS$80mS$5.8m7.2%14
Istana PlazaBandungS$78mS$8.1m10.4%10
Mal Lippo CikarangCikarangS$60.3mS$5.8m9.6%10
The Plaza SemanggiSudirmanS$143.2mS$10.4m7.3%14
Sun PlazaMedanS$179.3mS$14.3m8.0%13
Plaza Medan FairMedanS$121.7mS$11.8m9.7%10
Pluit VillageJakartaS$139.2mS$11.4m8.2%12
Lippo Plaza Kramat JatiKramat JatiS$61.2mS$3.7m6.0%17
Palembang Square ExtensionPalembangS$27.3mS$2.8m10.3%10
Tamini SquareJakartaS$25.2mS$2.1m8.3%12
Palembang SquarePalembangS$68.4mS$5.2m7.6%13
Pejaten VillageJakartaS$102.2mS$9.7m9.5%11
Binjai SupermallBinjaiS$28.4mS$1.7m6.0%17
Lippo Mall KemangJakartaS$388.4mS$1.3m0.3%299
Depok Town Square UnitsDepokS$22.1mS$1.9m8.6%12
Grand Palladium UnitsMedanS$20.1mS$1.8m9.0%11
Java Supermall UnitsSemarangS$20.5mS$1.8m8.8%11
Malang Town Square UnitsMalangS$22.2mS$1.9m8.6%12
Mall WTC Matahari UnitsTangerangS$18.1mS$1.6m8.8%11
Metropolis Town Square UnitsTangerangS$27.4mS$2.4m8.8%11
Plaza Madiun UnitsMadiunS$25.9mS$2.3m8.9%11
TotalTotalS$1841mS$126m6.8%15

CapitaRetailChinaTrust

CapitaR China Trust

This REIT offers exposure to retail properties in China. Based on higher capitalisation rates, we can tell that the properties are more bang for buck in China than in Singapore. With the same amount of capital invested, you would likely get higher rents in China.

The reason (or excuse) for the under performance of CapitaMall Minzhongleyuan was due to a road closure leading to the mall.

PropertyLocationValuationNet IncomeCapitalisation RateEarnings Multiple ("PE Ratio")
CapitaMall XizhimenBeijingS$588mS$38m6.5%15
CapitaMall WangjingBeijingS$434.4mS$29.6m6.8%15
CapitaMall Grand CanyonBeijingS$413mS$17.8m4.3%23
CapitaMall AnzhenBeijingS$206.2mS$13.8m6.7%15
CapitaMall ErqiHenanS$128.4mS$8.3m6.5%15
CapitaMall MinzhongleyuanHubeiS$119.5mS$0.28m0.2%427
CapitaMall ShuangjingBeijingS$118.2mS$7.5m6.3%16
CapitaMall QibaoShanghaiS$102.8mS$8.5m8.3%12
CapitaMall SaihanInner MongoliaS$84.8mS$6.2m7.3%14
CapitaMall WuhuAnhuiS$55.1mS$2.4m4.4%23
TotalTotalS$2251mS$132m5.9%17

 MapleTree-Greater China Commercial

MapleTree GCC Trust

This REIT has a property in Hong Kong and another in China.

 

PropertyLocationValuationNet IncomeCapitalisation RateEarnings Multiple ("PE Ratio")
Festival WalkHong KongS$4078mS$162.1m4.0%25
Gateway PlazaBeijingS$1271mS$67.2m5.3%19
TotalTotalS$5349mS$229m4.3%23

 

Conclusion

Finally we put together the capitalisation rates of the commerical REITs and make a comparison. Here are the insights we can draw:

  • Capitalisation rates are based on property valuation and not stock prices. High capitalisation rates does not mean a good buy. It just means the properties and management are able to command higher rents. The REITs may already priced in this effect with a premium. The utility is that we tend to know which REITs  have higher quality properties and management.
  • LippoMalls and CapitaR China, being overseas, had higher capitalisation rates because of low property valuations.
  • CapitaR China was doing better than MapleTree GCC, for similar locations and property types.
  • CapitaMall Trust has the best capitalisation rates for Singapore commercial properties.
  • Commercial REITs with more office properties command lower rent than commercial REITs with more retail properties.

 

REITCapitalisation RateEarnings Multiple
LippoMall Trust6.8%15
CapitaR China Trust5.9%17
CapitaMall Trust5.8%18
Starhill Global REIT5.5%18
Frasers Centrepoint Trust5.4%19
SPH REIT5.3%19
MapleTreeComm Trust5.3%19
FrasersComm Trust5.0%20
CapitaComm Trust4.6%22
Keppel REIT4.5%22
MapleTree GCC4.3%22
Suntec REIT3.5%29


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1Comment
  • Joseph Ho
    Posted at 20:05h, 20 April Reply

    Hi Alvin
    I am just curious which REIT Sector did better in term of monetary returns, the Office, Retail, Industrial or Hospitality in 2015. Appreciate if you can give a summary of each sector performance. Thanks

    Joseph

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