3 Best-Performing Singapore REITs in the First Half of 2024

What happened?

The REIT sector has had a tough time over the last two years.

Interest rates rose sharply as the US Federal Reserve hiked rates at its fastest pace ever to combat surging inflation.

With REITs relying predominantly on debt financing for their operations and capital expenditure, it’s no surprise that the sector was hard-hit.

Earlier, we shared the five best performing Singapore blue chip stocks in the first half of 2024 (1H 2024). 

This led to questions in the Beansprout community about the best performing REITs so far this year.

In this article, we sized up the REIT landscape to see which REIT was the best performer.

Here are the three best-performing REITs for 1H 2024

#1 – BHG Retail REIT (SGX: BMGU)

Leading the pack is BHG Retail REIT with a share price appreciation of 4.3% for 1H 2024.

BHG Retail REIT is a China-based retail REIT with a portfolio of six properties valued at RMB 4.7 billion as of 31 December 2023.

2023 saw the REIT’s gross revenue fall by 6.6% year on year from S$66.4 million to S$62 million.

Net property income (NPI) slid by 7.2% year on year to S$35 million.

The weakness was mainly due to the weakening of the RMB against the Singapore Dollar (SGD).

If not for currency effects, both revenue and NPI would have been higher year on year.

BHG Retail REIT’s distribution per unit (DPU) for 2023 came in at S$0.0043, 63.2% lower than the S$0.0117 paid out in 2022.

The REIT provided an upbeat business outlook for the first quarter of 2024 (1Q 2024).

The portfolio’s committed occupancy rate stood healthy at 95.6% while the weighted average lease expiry (WALE) by net lettable area (NLA) was 5.8 years.

BHG Retail REIT’s gearing ratio was 39.9% as of 31 March 2024 and the retail REIT had an average cost of debt of 5.5% with 50% of its loans hedged to fixed rates.

The REIT manager continues to work on revitalising the six malls by introducing new lifestyle and retail offerings.

Some of the new tenants include China Sports Lottery in Chengdu Konggang Mall and Childhood Delicacies in Hefei Changjiangxilu Mall.

The malls also continue to engage shoppers with Chinese New Year celebrations and organise activities for children and families.

Looking ahead, BHG Retail REIT will continue its proactive community positioning for its malls and also explore potential acquisition opportunities from the sponsor’s pipeline and third-party vendors.

Find out how much dividends you would have received as a shareholder of BHG REIT in the past 12 months with the calculator below. 

Related links:

• BHG REIT share price and analysis
• BHG REIT dividend history

#2 – Cromwell European REIT (SGX: CWBU)

Cromwell European REIT, or CEREIT, is in second place with a small decline of 0.7% for 1H 2024.

The REIT owns more than 100 predominantly freehold properties in a variety of European countries such as Italy, Poland, France, Denmark, Slovakia, and the UK, to name a few.

CEREIT reported a downbeat set of earnings for 1Q 2024 with gross revenue slipping by 2.7% year on year to €53.3 million.

NPI also dipped by 2.7% year on year to €32.7 million while indicative DPU fell by 10.2% year on year to €0.03505.

The portfolio’s operating metrics were healthy with occupancy of 93.4% and a positive rental reversion of 9.2%.

Looking at debt metrics, CEREIT had an aggregate leverage of 41.3% as of 31 March 2024 with an all-in average cost of debt of 3.28%.

The REIT recently welcomed a new sponsor, Stoneweg, an alternative investment fund, to replace the outgoing sponsor, Cromwell Property Group.

Stoneweg acquired a nearly 27.8% interest in CEREIT as well as a 100% interest in the Singapore property manager of the REIT.

The REIT’s property valuations also saw a small 0.6% increase to €2.24 billion as of 30 June 2024 compared with 31 December 2023.

This increase reflects stabilising conditions in Europe and improved financing conditions for selected asset classes.

The manager is also moving along with the REIT’s divestment pipeline (see below).

Back in April, CEREIT divested two properties in Finland and Italy for €7.2 million, a blended premium of 2.1% to their latest valuations.

The REIT has earmarked another €150 million in potential divestments over the next one to two years.

The manager also has a €200 million-plus development pipeline for four major assets to undergo redevelopment or extensive refurbishment in countries such as Italy, The Netherlands, and France.

Find out how much dividends you would have received as a shareholder of Cromwell European REIT in the past 12 months with the calculator below. 

Related links:

• Cromwell European REIT share price and analysis
• Cromwell European REIT dividend history
• kopi-C with Cromwell European REIT CEO: 'Real estate's in my blood'

#3 – Sasseur REIT (SGX: CRPU)

Sasseur REIT comes in third place with a small 1.4% decline in its share price for 1H 2024.

The retail REIT owns four outlet malls in China which are located in Chongqing (2), Hefei (1), and Kunming (1).

The malls are run based on an entrusted management agreement (EMA) model which has a fixed component and a variable component.

The fixed rent is subject to an annual 3% escalation rate while the variable portion is pegged to a percentage of the outlet mall’s sales, which varies from 4% to 5.5%.

For 1Q 2024, Sasseur REIT’s EMA rental income increased by 1.2% year on year to RMB 172.6 million due to the high base effect of outlet sales in 1Q 2023 offset by the 3% rental escalation for the EMA model’s fixed component.

In SGD terms, EMA rental income dipped by 1.4% year on year because of the depreciation of the RMB against SGD by 2.5%.

Portfolio occupancy remained high at 97.9% in 1Q 2024 with a WALE of 2 years by NLA.

Like BHG Retail REIT, Sasseur REIT also enticed shoppers with fun-filled events during the quarter such as performances during Spring Carnival and runaway shows featuring fashion brands during Women’s Day.

Another encouraging fact is that the number of VIP members within its membership base kept increasing over the years.

Membership started at 2.1 million at the end of 2020 and has grown to 3.7 million in 1Q 2024, for an average compound annual growth rate of close to 19%.

This statistic is important for the REIT as VIP members contributed more than 60% of the REIT’s outlet sales.

For the remainder of 2024, management intends to sharpen the tenant mix and drive VIP member recruitment.

Sasseur REIT will also seek to expand its portfolio with acquisition priority being the sponsor’s Xi’An and Guiyang outlets for which the REIT has been granted the right of first refusal.

Related links:

• Sasseur REIT share price and analysis
• Sasseur REIT dividend history
• kopi-C with Sasseur REIT’s CEO: ‘Consumption downgrade benefits us’

What would Beansprout do?

The three REITs above all have foreign assets located in Europe and China, but these have done well for the REIT as their portfolios remained resilient.

Investors should also remember that if the yield on each REIT is factored in, their overall performance would all have been positive for 1H 2024.

It’s important to review each REIT to identify its strong traits as well as its risks before you allocate money to them.

To review each REIT, we have come up with a checklist to evaluate these REITs based on their fundamentals, financials and valuation.

We would monitor how these REITs measure up on this checklist to track to decide if they are worth adding to our watchlist.

You can access the checklist through these links:

• BHG REIT investing checklist

• Cromwell European REIT investing checklist

• Sassuer REIT investing checklist

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