SINGAPORE (May 8): For the next few months, investors may start monitoring price to net asset value for REITs rather than their yields. On April 16, the Ministry of Finance and Inland Revenue Authority of Singapore announced it will extend the timeline for REITs to distribute at least 90% of their taxable income from three months to 12 months after the end of FY2020 to qualify for transparency. Those with March year-ends will have until March 31, 2021, to distribute at least 90% of taxable income derived in FY2020, and those with December year ends have until Dec 31, 2021, to distribute their taxable income.

As a result, a number of retail REITs, including SPH REIT, Mapletree Commercial Trust, Frasers Centrepoint Trust and CapitaLand Mall Trust are withholding between 40% to 80% of their income available for distribution for the January-March quarter.

Interestingly, there wasn’t much change in the valuations of the properties. This is because net property income continued to rise. Vivocity’s valuation, for instance, changed little over the year. Elsewhere, Festival Walk’s valuation rose 2.5% in Singapore dollars, to $5.09 billion despite being shut for a short period last year. Its capitalisation rate was unchanged at 4.15%. Festival Walk is owned by Mapletree North Asia Commercial Trust.

The REITs with the highest P/NAV (see chart 1), which include Keppel DC REIT, ParkwayLife REIT, Mapletree Industrial Trust, Mapletree Logistics Trust and Ascendas REIT, are likely to be the most defensive during Covid-19.

On the other hand, the REITs with the lowest P/NAV in chart 2 include names such as ARA US Hospitality Trust which has lost more than 50% this year. Investors are likely to steer clear of US hospitality trusts following their experience with Eagle Hospitality Trust.

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