In one of my earlier post, I mentioned that I have 1 lot (1,000 units) of CapitaMall Trust which I bought using part of my “fun money”.
CapitaMall Trust is a real estate investment trust (REIT). In Singapore, REITs are required to pay out at least 90 per cent of their distributable income to unit holders. This requirement alone makes REITs an attractive dividend play for me, which supplements Index Investing well. REITs isn’t going to make you rich overnight, but it provides a nice and steady stream of income which is what I’m interested in. Sure beats leaving the cash in the bank, doesn’t it?
There are various types of REITs, depending on what are the underlying property assets. Generally, a REIT can be categorized as follows –
- Retail – CapitaMall Trust, Frasers Centrepoint Trust, etc
- Hospitality – CDL Hospitality Trust, Far East Hospitality Trust, etc
- Office – CapitaCommercial Trust, Suntec REIT, etc
- Industrial – Mapletree Industrial Trust, Cache Logistics Trust, etc
- Healthcare – Parkway Life REIT, First REIT, etc
There may also be hybrid REITs which have properties involved in one or more sectors. Among the five types of REITs, retail and healthcare are more defensive, and thus typically pay out less dividends. Even in times of poor economic conditions, people would still require healthcare services and retail services.
You may think that retail REITs would suffer badly during a financial crisis or recession, but take a closer look and you’ll see that under CapitaMall Trust or Frasers Centrepoint Trust portfolio, many of the shopping malls are actually located in sub-urban areas. These shopping malls cater to the daily lives of the population and necessity shopping. Economic crisis or not, people need to go to supermarkets, people need to eat, and people do need (cheap) leisure activities.
CapitaMall Trust (CMT)
CapitaMall Trust is the first, and also the largest real estate investment trust in Singapore. Starting from only three shopping malls (Tampines Mall, Junction 8, Funan DigitaLife Mall) back in 2011, it has grown into massive juggernaut it is today through acquisitions and asset enhancements.
2013 3rd Quarter
2013 3rd quarter distribution per unit comes down to 2.56 cents – time to collect a little bit of money! Annualized distribution yield is currently at 5.08%.
Defensive Traits of CapitaMall Trust
Large population catchment areas
Most shopping malls are located beside MRT/LRT lines
Strong sponsors (CapitaMalls Asia, CapitaLand, etc)
Excellent management with asset enhancement initiatives (AEIs)
Future Boost to Earnings
2013 4Q – Opening of Westgate retail portion, in which CMT has 30% stake
2013 4Q – Completion of Bugis Junction asset enhancement works Phase 1
2013 4Q – Start asset enhancement works on Bugis Junction Phase 2
2014 1Q – Start asset enhancement works on Tampines Mall
To understand more about REITs in Singapore, check out the excellent book by Bobby Jayaraman titled Building Wealth Through REITs. It will contain everything you would want or need to know about REITs.