Office S-REITs

Nearly All Office S-REITs Record Lower Distributable Income

SINGAPORE – Of the six Singapore-listed real estate investment trusts (S-REITs) that own office properties and had reported their latest financial results for the second half ended 31 December 2022, only one managed to witness a positive annual growth in both distributable income and distribution per unit (DPU), reported The Business Times on Wednesday evening (1 March, SGT).

Keppel REIT was the sole exception among office S-REITs, but it only recorded a positive year-on-year growth in both distributable income and DPU thanks to a S$10 million anniversary distribution for the period. Excluding this amount, distributable income from its operations, would have fallen by 3.8 percent year-on-year in H2 2022.

By asset class, office S-REITs were among the worst performing real estate investment trusts (REITs) in the latest round of financial results. For the other sub-sectors, the results were mixed.

Of the 29 S-REITs across different property segments, 15 registered positive annual growth in DPU for the fiscal year ended 31 December 2022, 12 saw a contraction, while two were unchanged. For distributable income, about 20 saw a positive year-on-year growth, while nine witnessed a decline.

Compared to the previous quarter or half-year periods, nearly two-thirds of S-REITs have registered a fall in their DPU, indicating that DPU could drop further in the future, amidst higher borrowing costs amid rising interest rates.

Of the 34 S-REITs that announced DPU figures, 16 witnessed an increase, while another 16 registered declines, and two others had DPUs unchanged from the preceding fiscal year.

“Plateauing rates, an appreciating Singapore dollar and reopening of borders globally add to our positive view of S-REITs,” commented Maybank analysts Li Jialin and Krishna Guha.

“That said, sticky inflation and a higher-for-longer thematic, a sluggish Singapore dollar bond market, potential recession and tight spreads make us pause,” added the analysts.

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