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Business Times
25-05-2025
- Business
- Business Times
Interest costs fall for S-Reits in Q1, but US tariffs cloud outlook
[SINGAPORE] Interest costs eased for more Singapore-listed real estate investment trusts (S-Reits) in the first quarter of FY2025, even as looming US tariffs cast a shadow over their prospects for the second half of the year. Nearly three-quarters of S-Reits saw flat to moderate interest cost declines in Q1 compared to a year ago, said Vijay Natarajan, an analyst with RHB Bank, following the release of S-Reits' Q1 results and business updates. Singapore-focused S-Reits had the largest drop in interest costs, with Far East Hospitality Trust (FEHT) , OUE Reit and Sasseur Reit among those that had the largest quarter-on-quarter declines. While most S-Reits have been unaffected by the global tariffs imposed by the US administration so far, there are indications that they could have an indirect impact on S-Reits in the second half of this year, said analysts. 'Tenants are cautious to sign long leases, and investment and divestment activity have slowed as buyers and sellers are revisiting underwriting assumptions,' said Krishna Guha, analyst at Maybank Securities. Q1 performance Most Reits and property trusts did not disclose distribution details in their quarterly updates. A NEWSLETTER FOR YOU Tuesday, 12 pm Property Insights Get an exclusive analysis of real estate and property news in Singapore and beyond. Sign Up Sign Up Nevertheless, of the 13 trusts that provided distribution per unit (DPU) figures for Q1 in their latest results or business updates, six reported year-on-year declines, data compiled by The Business Times showed. There was an almost even split across the 27 S-Reits that reported revenue growth, with 14 of them posting higher growth. Across the 31 trusts that reported their net property income (NPI), 17 registered a decline. Analysts said that the latest results reported by S-Reits were broadly in line with their expectations. The majority of S-Reits under RHB's coverage reported in-line results with operational numbers remaining 'strong', said Natarajan. 'More than half of the S-Reits that reported financials... saw positive quarter-on-quarter and year-on-year net property income growth, supported by stable occupancy and positive rent reversions,' he said. Likewise, OCBC's research team said in a note on May 15 that the overall DPU for the 10 counters under its coverage fell 2.8 per cent year-on-year. In terms of valuation, the current price-to-book ratio is still 'undemanding' at 0.82 times as it is still below the eight-year average of 0.98 times. Hospitality sector hit Analysts said the hospitality sub-sector was among the worst performers in Q1, as revenue per available room (RevPar) declined year on year due to fewer major concerts. 'This hurt hospitality S-Reits with significant geographical concentration locally,' noted OCBC. FEHT's RevPar fell 6 per cent, while CDL Hospitality Trust saw a 15.8 per cent drop compared to a year ago. On the other hand, the retail sub-sector turned in a 'resilient' performance. Darren Chan, a senior research analyst at Phillip Securities Research, said that S-Reits with suburban retail assets, which saw rental reversions in the high single digits, were supported by consumers' focus on essential spending. However, retail assets more exposed to the hospitality sector, such as those in Starhill Global Reit and Suntec Reit's portfolios, had lower shopper traffic and tenant sales year on year. This was due to the absence of high-profile events and more cautious consumer sentiment ahead of potential US tariffs. Going forward Given the uncertainties posed by the US tariffs, Maybank's Guha expects the operating trend for Q2 to be similar to Q1. Sharing his view, OCBC said that in view of uncertainty over tariffs, it is important for investors to take into consideration the quality of the asset portfolio, geographical location of assets, track record and balance sheet strength of S-Reits. However, analysts remained optimistic of the longer-term performance of S-Reits in view of falling interest rates. Chan expects S-Reits to register a year-on-year growth in their DPU in FY2026. Similarly, OCBC forecasts a recovery in DPU by 4.4 per cent on average in FY2027, assuming there is no global recession. Among S-Reits, Natarajan thinks large-cap, high-quality Singapore-centric Reits could do well. He favours industrial, office, healthcare and suburban retail sub-sectors, while hospitality is the least preferred. OCBC prefers S-Reits that can exhibit DPU growth and are backed by strong sponsors. Its top picks are CapitaLand Ascendas Reit , CapitaLand Integrated Commercial Trust , Keppel DC Reit and Parkway Life Reit .
Business Times
20-05-2025
- Business
- Business Times
RHB names its S-Reit top picks on softer interest cost pressures, minimal tariff impact
[SINGAPORE] RHB analysts maintained their 'overweight' call on Singapore-listed real estate investment trusts (S-Reits) amid 'softer interest cost pressures' – particularly for Singapore-centric Reits. This comes as most S-Reits under RHB's coverage report lower overall interest costs, as 'sharp falls' in domestic rates have benefited interest costs, said RHB analyst Vijay Natarajan in a Tuesday (May 20) research note. 'The majority (of S-Reits are) reporting lower overall interest costs. The fall in benchmark rates has also resulted in lower yields for alternative options (ie Treasury bills and Singapore savings bonds) and rising yield spreads for S-Reits – potentially creating room for fund inflows to the sector if the tariff overhang is removed,' he said. 'With benign sector valuations, we still see medium-term risk-rewards in favour of S-Reits,' he noted. Top picks include CapitaLand Integrated Commercial Trust (CICT) , CapitaLand Ascendas Reit (Clar) , Frasers Centrepoint Trust (FCT) , Keppel Reit , and Aims Apac Reit – all of which were assigned a 'buy' call. Cautiously positive guidance, strong operating numbers The majority of S-Reits under RHB's coverage reported in-line results with operational numbers remaining 'strong', Natarajan said. A NEWSLETTER FOR YOU Tuesday, 12 pm Property Insights Get an exclusive analysis of real estate and property news in Singapore and beyond. Sign Up Sign Up 'More than half of the S-Reits that reported financials... saw positive quarter-on-quarter and year-on-year net property income growth, supported by stable occupancy and positive rent reversions,' he said. A key positive was 'softer interest cost pressures', particularly for S-Reits focused on Singapore. There were no major changes to operational performance guidance, which is 'cautiously positive', as the direct impact of US tariff policies has been 'minimal' so far, while risks of uncertainties stemming from them remain clouded. Hence, a majority of the S-Reits under coverage foresee stable occupancy rates and positive rent reversions, barring certain overseas markets and segments. Singapore-centric Reits favoured to 'outperform' Among S-Reits, Natarajan thinks large-cap, high-quality Singapore-centric Reits could do well. In particular, he favours industrial, office, healthcare and suburban retail sub-sectors, while that of hospitality is the least preferred. 'Amidst a currently volatile macroeconomic backdrop, we expect Singapore-centric Reits to continue to relatively outperform and see larger fund inflows.' This comes as stable and supportive government policies post-election could create room for fiscal policy support in the event of an economic downturn, which is a positive for the real estate sector, Natarajan said. Noting that the three-month key benchmark Singapore overnight rate average has declined 70 basis points year to date, he adds that falling domestic interest rates are lowering Singapore-dollar denominated borrowing costs. 'Nearly three quarters of S-Reits saw flat to moderate interest cost declines quarter on quarter, with the largest declines seen among Singapore-centric S-Reits,' he said. 'In addition, most of the S-Reits also noted slight reductions in bank loan margins amid a flush of liquidity in the banking system.' Reits that logged the highest quarter-on-quarter interest cost declines include Far East Hospitality Trust (60 basis points), OUE Reit (50 basis points), Sasseur Reit (30 basis points), First Reit (30 basis points) and Acrophyte Hospitality Trust (30 basis points). Moreover, the stability of the Singapore dollar – benefiting from 'capital flight-to-safety' – and the Republic's growing financial hub status, could further benefit Singapore-centric Reits, he said.
Time of India
14-05-2025
- Business
- Time of India
Thailand: Frasers Property makes second try to take REIT private in $1 billion deal
BENGALURU: Thai business magnate Charoen Sirivadhanabhakdi's Frasers Property , on Wednesday, made a second attempt to take complete control of Frasers Hospitality Trust in a deal valuing the REIT at S$1.37 billion ($1.1 billion). The billionaire's family and Frasers Property already own a little over 60% of the hospitality real estate investment trust's (REIT) units, and have offered S$0.71 for each unit they do not own. The offer represents a 6.8% premium to the unit's closing price on Tuesday. The units' trading price jumped 4.5% on Wednesday to S$0.695, their highest since early September, 2022. Frasers Property's first buyout attempt, made in 2022 and worth S$0.70 per share, failed to get shareholder support. However, the Singapore-based developer's attempt is likely to succeed this time due to a compelling offer price, softening outlook of the hospitality sector and the REIT's small asset size, which limits its growth potential, said Vijay Natarajan , analyst at RHB Bank Singapore . The REIT, which debuted on the Singapore Exchange in 2014, manages a portfolio of 14 hospitality assets-including hotels and serviced residences-across nine cities in Asia, Australia, and Europe. Singapore's REIT sector has faced worries since the COVID-19 pandemic due to issues over rising interest rates, macroeconomic uncertainties and a weaker foreign exchange rate against the local dollar. "Hospitality trusts are inherently exposed to more business volatility due to shorter stays and periodic capital expenditure for asset enhancement initiatives," the companies said. Frasers Property said the REIT would remain constrained by both macroeconomic challenges and structural limitations, potentially hindering its ability to grow distributions per security (DPS) and net asset value (NAV).
