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I am a first-time investor. I have been sitting on cash for the past 3 years too concerned with what might happen if I was to start investing. Those days are past and I have now taken the decision to throw myself at the mercy of the markets. I am hoping to do so however with the help and... More
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  • Brief Introduction To Singapore REITs

    When it comes to investing in US markets, I am classed as a non-resident alien. This has its pro's and its cons, but I feel that the latter outweigh the former sadly. The key gripe for me is the 30% withholding tax that I am subject to on income streams derived from investments in ETFs, Bonds and Stocks (where the companies behind each instrument are US-based companies).

    Based in Singapore, I am busy putting a portfolio of cash that I have been hoarding for the past 2 years (still kicking myself for missing out on the past 9 months) and while I do find the allure of US mREITs attractive at first glance, once the obligatory 30% has been lopped off my dividend stream, the risk/return profile is less attractive to me.

    I have prepared the below table which is what the mREITs that I follow look like through the eyes of a non-resident alien (which, in the case of a Singapore tax resident, does not have a double taxation treaty with the US). I am currently considering an investment in the top 5 listed below when adequate pricing levels present; Armour (ARR), American Capital (AGNC), Chimera (CIM), American Capital Mortgage (MTGE) and Two Harbors (TWO):

    (click to enlarge)Some of the US mREITs that I follow

    Now, for those of you that are now aware of this, one of the great benefits of investing in the Singapore Stock Market is that there is 0% tax on dividends and 0% tax on capital gains to all individual investors, regardless of whether you are tax resident in Singapore or not.

    The purpose of this brief is however not to give readers an overview of the SGX market, but rather to present to you the investment opportunities that exist in the Singapore REIT market (note, that these REITs are dissimilar to mREITs as they rather invest in actual property). Like many REITs, the Singapore REITs pay out 90% of their income to investors in the form of a dividend.

    The below table is an overview of some of these opportunities:

    (click to enlarge)A selection of Singapore REITs

    Now, with the fundamentals out of the way, it's time to shed some light on what some of these REITs actually do. I have chosen a few of the REITs shown above that I think are noteworthy. For the purposes of currency conversion below, a rate of 1 USD = 1.24869 SGD can be used.

    Ascendas Reit (A17U.SI)

    The first and largest industrial Reit in Singapore with a portfolio of properties in the Business & Science Parks, Hi-Tech Industrial, Light Industrial/Flatted Factories, Logistics & Distribution Centres as well as Warehouse Retail Facilities. Major tenants include SingTel, C&P Logistics, Siemens, Honeywell, Zuellig Pharma, LFD (Singapore), OSIM International, Venture Corporation, Federal Express, Freight Links Express, Johnson & Johnson, RSH, Infineon Technologies, Procter & Gamble and Hyflux.

    Market Cap: SGD 4,254m
    Assets Under Management: SGD 4,420m

    (click to enlarge)

    From 2011 Annual Report

    Cambridge Industrial Trust (J91U.SI)

    Singapore's first independent industrial REIT. CIT invests in 45 quality income-producing industrial properties and 2 built-to-suit projects, used primarily for industrial, warehousing and logistics purposes, valued at S$1,020.3 million (as at 30 September 2011). The properties are located across Singapore.

    Market Cap: SGD 642m
    Assets Under Management: SGD 1,024m
    Annual Report: media.corporate-ir.net/media_files/IROL/19/196153/Cambridge%20AR2011.pdf

    CapitaMall Trust (C38U.SI)

    CMT is the largest REIT by market capitalization and asset size in Singapore and has been assigned an 'A2' rating by Moody's Investors Service. The 'A2' rating is the highest rating assigned to a Singapore REIT.

    CMT owns and invests in quality income-producing assets, which are used for retail purposes primarily in Singapore. As at 31 December 2011, CMT's portfolio comprised a diverse list of more than 2,500 leases with local and international retailers. CMT's portfolio comprises 16 quality retail properties strategically located in the suburban areas and downtown core of Singapore.

    Market Cap: SGD 6,159m
    Assets Under Management: SGD 9,200m
    Annual Report: capitamall.listedcompany.com/ar.html

    (click to enlarge)

    Source: 2011 Annual Report

    CapitaCommercial Trust (C61U.SI)

    Singapore's first listed commercial REIT investing in properties predominantly used for commercial purposes.

    CCT's invested portfolio consists of 10 quality office buildings primarily situated in the prime location - Central Area - of Singapore. The properties are Capital Tower, Six Battery Road, One George Street, HSBC Building, Raffles City Singapore (60% interest through RCS Trust), Bugis Village, Wilkie Edge, Golden Shoe Car Park, CapitaGreen(40% interest in development through MSO Trust) and Twenty Anson.

    In Malaysia, CCT holds 30% stake in Quill Capita Trust (QCT), a commercial REIT listed on the Bursa Malaysia Securities Berhad that owns commercial properties in Kuala Lumpur, Cyberjaya and Penang. CCT also has 7.4% stake in the Malaysia Commercial Development Fund - CapitaLand's first and largest private real estate fund in Malaysia that focuses on real estate development properties in Kuala Lumpur and the Klang Valley.

    Market Cap: SGD 3,010m
    Assets Under Management: SGD 6,700m
    Annual Report: cct.listedcompany.com/misc/ar2011/ar2011.pdf

    K-REIT Asia (K71U.SG)

    K-REIT Asia is an office REIT with assets under management of more than $6 billion as at 31 March 2012. Their portfolio comprises eight office properties strategically located in the central business districts of Singapore, Brisbane and Sydney. These income-producing office assets are tenanted by established corporations across various business sectors and enjoy high occupancy rates.

    Among office REITs, K-REIT Asia has the highest exposure to the high- end prime grade-A sector. Given its exposure through Marina Bay Financial Centre phase 1 and One Raffles Quay, both via a one-third stake, K-REIT Asia is well positioned to ride the recovering office cycle where rentals and occupancy rates are better supported.

    Market Cap: SGD 2,410m
    Assets Under Management: SGD 6,004m
    Annual Report: kreitasia.com/admin/DownloadImageBank.aspx

    As already mentioned, this is just a brief introduction to Singapore REITs - there is certainly much more to this opportunity than I have documented here. Below I have included a link to a website that I think provides a rather well-rounded overview of this investment segment:

    www.investinpassiveincome.com/understanding-singapore-reits-part-one-reit-categories-continued/

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: AGNC, ARR, CIM, MTGE, TWO, reits
    Apr 19 4:48 AM | Link | Comment!
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