The REIT sector have come under pressure this year and may face further downside when the US economy falls into a recession next year. We could see a more prolonged market correction this year similar to the correctio in the first week of August.
When the market actually crashes in 2025 and 2026, it will be a great idea to single out which REITs you plan to buy. Here are 3 defensive REITs I plan to buy when the market crashes next year and 2026.
Parkway Life Real Estate Investment Trust
Parkway Life Real Estate Investment Trust (PLife REIT) was listed on 23 August 2007 just before the financial crisis in 2008. Since its listing in 2008, it has never had any rights issue or ask any money from shareholders.
Remarkably, it has consistently increased its DPU since its listing in 2008. For 1H 2024, PLife REIIT again did not disappoint investors, Though gross revenue dropped 2.7% to S$72.4 million, DPU went up 3.5% to 7.54 cents.
Cost of debt remains very low at 1.35% while gearing is at very healthy level of 35.3%. Interest cover is also very high at 10.6 times.
Hence, considering PLife REIT strong capital management and excellent track record of giving increasing dividends every year, it is definitely one of the 3 defensive REITs I plan to buy when the market crashes. You can view the REIT website here.
Frasers Centrepoint Trust
Frasers Centrepoint Trust (FCT) was listed on 5 July 2006 which is before the financial crisis. Ever since FCT was listed in 2006, FCT has given out steady dividends except during Covid in 2020 when Singapore had 2 months of circuit breaker.
For 3Q24 business update, FCT reported 99% portfolio committed occupancy while tenant sales increase by 0.7%. Gearing ratio remains below 40% at 39.1% with average cost of debt of 4.2%.
In the event of an economic recession next year, suburban malls which mainly consist of supermarkets and foodcourts as anchor tenants will remain more resilient than the malls located in the city.
Hence, when the market crashes next year, FCT will be one of the 3 defensive REITs I plan to buy. You can view the REIT website here.
First Real Estate Investment Trust
First Real Estate Investment Trust (First REIT) is a healthcare real estate investment trust focused on investing in healthcare real estate assets within and outside of Asia.
First REIT is managed by First REIT Management Limited. The Manager is 60% directly held by OUE Limited and 40% directly held by OUE Healthcare Limited who together are its Sponsors and hold a combined stake in First REIT of 44.7% as at 31 December 2023.
First REIT was listed in December 2006 before the financial crisis in 2008. Many investors do not like this REIT as they have suffered losses in the past.
However, First REIT had a bad recent history due to the structure in which First REIT was first listed in 2006. To cut the story short, First REIT has since been transformed with a new rental structure which is more sustainable in the long term.
For 1H 2024, First REIT reported net property income dropped by 4.1% to S$50.3 million while DPU dropped by 0.04 cent to 1.2 cent. This is mainly due to the stronger Singapore dollar against the rupiah and the Japanese Yen.
Gearing ratio remains healthy at 39.5% with interest coverage ratio of 4.0 times. In addition, there is no refinancing requirements until May 2026.
FCT being a healthcare REIT should remain resilient when the US economy enters recession next year and hence should be able to give stable DPU.
Despite having acquired a bad reputation due to its past history, investors should look forward and focus on buying resilient REITs that will be able to distribute stable dividends during an economic recession. You can view the REIT website here.
