S-Reits with best debt profiles have an average gearing ratio of 33.5%

[singapore] Last month, the US Federal Reserve opted to maintain its benchmark interest rate, adopting a cautious stance despite speculation about a potential rate cut as early as July, with chair Jerome Powell stating that future decisions will be data-dependent.

Market analysts now predict a 75-basis-point (bps) cut in 2025, up from the previously anticipated 50 bps.

Singapore real estate investment trusts (S-Reits) have delivered a commendable performance, closing the first half of 2025 with a 4.2 per cent total return, as indicated by the iEdge S-Reit Index. Over the past 12 months, S-Reits have delivered a 10.5 per cent total return.

Notably, the top 10 best-performing S-Reits have delivered double-digit returns in H1 2025. They include Frasers Hospitality Trust (21.5 per cent), CapitaLand Integrated Commercial Trust (14.3 per cent), Frasers Centrepoint Trust (11.4 per cent), CapitaLand Ascendas Reit (10.1 per cent) and Parkway Life Reit (10 per cent).

The iEdge S-Reit Index concluded H1 2025 at 1,021 and touched 1,030 on Jul 3, a level which was previously tested three times – in November 2024, January 2025 and April 2025. The consensus estimate target price for the next 12 months is pegged at 1,159.

From a balance-sheet standpoint, the S-Reit sector maintains an average gearing ratio of 40 per cent, reflecting prudent capital management; it is also well below the regulatory limit of 50 per cent.

The 10 S-Reits with the lowest gearing ratios are Sasseur Reit, Aims Apac Reit, Keppel DC Reit, Far East Hospitality Trust, Frasers Hospitality Trust, Frasers Logistics & Commercial Trust, Parkway Life Reit, Starhill Global Reit, IReit Global and Mapletree Pan Asia Commercial Trust.

On average, these 10 have a gearing ratio of 33.5 per cent.

Sasseur Reit, notable for its low gearing ratio of 25.9 per cent for the first quarter of 2025, reported a slight year-on-year (yoy) dip of 0.2 per cent in its entrusted management agreement (EMA) rental income for the same period. This was primarily due to weaker foreign exchange rates and lower variable income. However, in renminbi terms, Q1 2025 EMA rental income saw a 1.6 per cent yoy increase.

The Reit’s portfolio occupancy rate improved to 98.9 per cent, up from 97.9 per cent in the previous year, with higher occupancy recorded at its Chongqing Bishan and Kunming outlet malls in China. Its management remains committed to maintaining a healthy balance sheet to seize potential opportunistic acquisitions.

Sasseur Reit has the right of first refusal on two assets in Xi’an and Guiyang, and could also look for acquisition opportunities within other assets managed by its sponsor. As at Q1 2025, its sponsor Sasseur Group manages a total of 18 outlet malls, including the four properties owned by the group.

UOB Kay Hian research noted that the recent preference for quality names resulted in the three-month compounded Singapore Overnight Rate Average easing by 98 bps to 2.09 per cent in H1 2025. Despite this significant drop, there has been no positive price movement or re-rating for S-Reits. The research house expects broader recovery in liquidity from possible Fed rate cuts at the end of 2025 to lift the sector.

However, global geopolitical uncertainties and tariff risks remain in focus, and investors should stay nimble and watch data as they head into the second half of the year. SGX RESEARCH

The writer is a research analyst at SGX. For more research and information on Singapore’s Reit sector, visit sgx.com/research-education/sectors for the S-Reits & Property Trusts Chartbook.