There are 18 REITs in Malaysia and over 40+ REITs in Singapore. From the list of all the REITs in Singapore and Malaysia, they are different in nature with each of these REITs falling under a different type of REITs categories. Each of this type of REITs is unique and they have certain differences in characteristic as compared to others.
In this article today, we will be sharing more on the various type of REITs in both Malaysia in Singapore.
Retail REITs
Let’s start with retail REITs which we are sure many of you can easily relate to. Retail REITs are REITs that focus on properties such as shopping malls and hypermarket. Majority of the big and well-known malls in Singapore and Malaysia are owned by REITs.
In Singapore, you would be familiar with malls such as Suntec City, Paragon, Bugis+, Junction 8 and IMM Mall. These are malls which are owned and managed by Suntec REIT, Capitaland Mall Trust and SPH REIT. In Malaysia, some of the well-known malls such as Pavillion Mall, Midvalley, Sunway Pyramid, and Gurney Plaza are also owned and managed by REITs in Malaysia.
As an investor, it is important that you know that retail REITs revenue are driven by the rental they charged the tenants. Hence, their performance is highly correlated to the retailers’ performance. If they are facing cash flow problems or experiencing a disruption in business, these would result in a delay in payment or even default.
A great example would be during the COVID-19 pandemic. The circuit breaker and movement control order measure has resulted in retailers closing throughout this period. To help ease retailer burden, many retail REITs have provided their tenants with tenant rebates with the hope of easing their burden. Partly to also retain them post-pandemic.
Another key aspect is that the tenants are usually small compare to other type of REITs. Hence, there is a lower tenant concentration risk.
Hospitality REITs
The second type of REITs we would like to discuss is hospitality REITs. They owned and manages hotels, and serviced residence, by leasing out space in the properties to guests. We are sure most of you would have travelled at least once in your life, locally or overseas.
Let’s say you travelled to Kuala Lumpur for a business trip and stayed in JW Marriot Kuala Lumpur. Throughout the stay, you would have incurred room rental and paid for some meals & beverage. These amount which you have paid are revenue to REITs in this sector. Other examples would be attending your family and friends weddings held in a hotel. This function room rental is also revenue to them.
Hotels such as Ritz-Carlton Kuala Lumpur, Brisbane Marriott, Sunway Pyramid Hotel, Orchard Hotel, and Intercontinental Singapore are owned by REITs. The hotel and serviced residence owned are usually fairly diversified and located in various countries. Hence, this might result in some foreign exchange risk.
One key aspect investor needs to know about the hospitality industry is that it is seasonal. Unlike retail REITs where it will be flooded regarding the time of the year, hospitality REITs experience peak and off-peak seasons.
Healthcare REITs
Healthcare REITs are another type of REITs which is popular among investor due to their defensive nature. They invest in assets such as hospitals, nursing homes and even nursing colleges. The healthcare sector is rather more defensive as compared to other sectors for a simple reason. Regardless of economic condition, people would still need healthcare. If you look at the recent COVID-19 pandemic, other sectors are badly affected but hospitals are filled.
For comparison purpose, we will look at Ascott Residence Trust and Parkway Life REIT. Ascott Residence Trust is a hospitality REITs that own serviced residences, hotels, rental housing properties and other hospitality assets in any country in the world. Parkway Life REIT on the other hand, own hospitals in Singapore, Malaysia and Japan. If you were to look at the historical share price of Parkway Life REIT, the dip in share price during the 2008 financial crisis and the current COVID-19 pandemic is lesser compared to Ascott Residence Trust.
There are only 3 healthcare REITs in Singapore and Malaysia as at the time of this writing which are First REIT, Parkway Life REIT and Al-Aqar REIT. Due to the more defensive nature of the REITs, investors love healthcare REITs. Hence, they are often overvalued.
Office REITs
The fourth type of REITs is office REITs. They own and manage offices by renting it out to tenants. The performance of these class of assets would be depending on the tenants’ industry. Unlike the other 4 types of REITs, the tenants may range from various industries such as oil and gas, professional firm, technology and etc.
One of the key area investors need to look at when investing in office REITs is to avoid investing in REITs with a high concentration tenant concentration in the same industry. A decline in that industry would be detrimental to the performance of the REITs.
Industrial REITs
The last type of REITs which would like to discuss is industrial REITs. They own and lease out industrial facilities, warehouses, factories and distribution centres to tenants. These class of REITs are usually more concentrated in which the tenants would usually lease the entire facilities as opposed to single lot or floors.
Depending on how you look at it, this would reduce the need to constantly look for new tenants as tenants in this sector would likely lease for a long period of time. The downside would be in the event where the tenants vacate the building, it would be a huge loss in earnings to the REIT. It would also take a longer time to occupy an industrial property as opposed to properties in other sectors.
In Summary, there are various sectors within REITs itself. As an investor, it is important to know what they are before investing in them. Each of these types reacts differently to the market and they have their own pro and cons. By knowing them, you will be a better investor.
Hopefully, the following have been helpful. If you are just getting started, feel free to read more of our REIT Guide and REIT Analysis. You can also read more about some of the great reasons to invest in REITs.
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There is education property in MREITs where not existed in SREITs too.
Hey Vince, thanks for pointing out. You are right. Some of the REITs are rather diversified in terms of their portfolio. i.e Al-Aqar REIT which is in the healthcare sector which owned medical and nursing college as well. Do you know of any REIT in this region which hold only education properties?
I have only just started to look at MREIT, haven’t finish analyze all. So far I see Al-Aqar, AL-Salam, AmanahRaya have properties for education purpose. For your MREIT snapshot, do you plan to update DPU, NAV and gearing according to quarter report? This would definitely be better as Annual Report information is lagging.