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Singapore's REIT sector going through rough patch

After seeing several bouts of sell-offs in 2013, the S-REIT index is now at its lowest level in almost one and a half years.

SINGAPORE: Singapore's real estate investment trust (REIT) sector has been going through a rough patch.

After seeing several bouts of sell-offs in 2013, the S-REIT index is now at its lowest level in almost one and a half years.

But several REITs have reported record results this earnings season.

Channel NewsAsia finds out if that could help boost sentiment in the sector.

The latest REIT to list on the Singapore market has disappointed investors on its debut. OUE Commercial Trust opened below its IPO price of 80 cents last week, and has been underwater since.

Analysts said part of the reason is that interest in REIT-investing has waned considerably.

Daily volume for the sector has fallen, and the S-REIT Index has dropped 16 per cent over the past year, compared to a 10 per cent drop for the Straits Times Index (STI).

Liu Jinshu, lead analyst at Voyage Research, said: "A bottom may have been reached right now, but the uptrend is not so obvious yet.

"So from a macro perspective, I'd say that investors who are looking for income should go into REITs, but if you're looking for capital upside, share price appreciation, I think some other sectors will be more appropriate."

But there may be some reasons to cheer.

Of the 13 major REITs that have reported full-year results so far, two have achieved record distributable income -- these are Ascott REIT and Keppel REIT.

Another two -- Cambridge Industrial Trust and Starhill Global REIT -- have also hit record distribution per unit (DPU).

Analysts said a combination of rising DPUs and declining unit prices will translate to higher yields for investors.

However, that is unlikely to happen across the board.

Investors will have to evaluate each REIT based on attributes, such as the stability of its income source and its debt structure.

Wong Sui Jau, general manager at Fundsupermart.com, said: "Commercial property-type REITs are probably going to fare better, because I feel that generally, they have reached a certain level in their sell-off and there's more potential for them to rebound, where REITs are concerned."

On average, S-REITs offer a yield of 6.8 per cent.

Those returns -- coupled with low or declining unit prices -- now pale in comparison to the double-digit unit price gains seen in developed markets like the US and Japan. 

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