Periodic/Sector reports
REITs - 2Q26 Round-Up: Soldiering On With Resilient Yield
OVERWEIGHT (Maintained)
Analyst
Highlights
- KDCREIT and SUN surpassed expectations, but hospitality REITs CLAS and FEHT missed expectations. Results of 11 out of the 15 large cap S-REITs met expectations.
- An influx of safe-haven liquidity and low domestic interest rates have led to a record volume of transactions for commercial properties, encompassing office and retail properties. Thus, the S-REIT sector is supported by firm asset valuation and a continued low cost of debt.
- Maintain OVERWEIGHT. S-REITs are laggards and, therefore, more resilient. BUY CICT (Target: S$3.06), FLT (Target: S$1.33), MPACT (Target: S$1.75), NTTDCR (Target: US$1.31) and UIBREIT (Target: S$1.16).
Analysis
- More S-REITs exceeding expectations. KDCREIT and SUN surpassed expectations, but hospitality REITs CLAS and FEHT missed expectations. Results of 11 out of the 15 large cap S-REITs met expectations.
- Retail: Sustained pick-up in tenant sales growth. FCT’s portfolio committed occupancy eased 0.2ppt qoq to 99.6% as of Jun 26. Tampines Mall, Tiong Bahru Plaza and Century Square saw a dip in occupancies averaging 0.6ppt qoq due to transitional downtime as FCT tweaked its tenant mix. On an ytd basis, tenant sales increased 1.8% yoy. Aggregate leverage has been reduced by 3.5ppt to 36.5% after divesting White Sands for S$467m.
- LREIT maintained a healthy rent reversion of 11.7% in FY26 (313@Somerset: mid-single-digit, Jem: high single-digit and PLQ Mall: high teens). Growth in tenant sales was stronger at 4.0% yoy in FY26 (9MFY26: 2.5% yoy). LREIT has further reduced its reliance on perpetual securities after issuing only S$120m of new perpetual securities to partially refinance S$200m due in Jun 26. Interest coverage ratio improved 0.5x yoy to 2.1x.
- Office: Limited supply supports positive reversions. KREIT achieved a strong positive rental reversion of 12.8% in 1H26 (Singapore: 10%, Australia: >20%). Rent reversion should improve in 2027 as the average rent of leases expiring is lower at S$11.49 psf pm. KREIT announced the divestment of KR Ginza II in Tokyo for JPY11.5b (S$91.4m). It is also exploring the divestment of T Tower in Seoul, which is valued at KRW305.4b (S$269.7m). Management intends to utilise the divestment proceeds to pare down debt and pursue unit buyback.
Highlights
- KDCREIT and SUN surpassed expectations, but hospitality REITs CLAS and FEHT missed expectations. Results of 11 out of the 15 large cap S-REITs met expectations.
- An influx of safe-haven liquidity and low domestic interest rates have led to a record volume of transactions for commercial properties, encompassing office and retail properties. Thus, the S-REIT sector is supported by firm asset valuation and a continued low cost of debt.
- Maintain OVERWEIGHT. S-REITs are laggards and, therefore, more resilient. BUY CICT (Target: S$3.06), FLT (Target: S$1.33), MPACT (Target: S$1.75), NTTDCR (Target: US$1.31) and UIBREIT (Target: S$1.16).
Analysis
- More S-REITs exceeding expectations. KDCREIT and SUN surpassed expectations, but hospitality REITs CLAS and FEHT missed expectations. Results of 11 out of the 15 large cap S-REITs met expectations.
- Retail: Sustained pick-up in tenant sales growth. FCT’s portfolio committed occupancy eased 0.2ppt qoq to 99.6% as of Jun 26. Tampines Mall, Tiong Bahru Plaza and Century Square saw a dip in occupancies averaging 0.6ppt qoq due to transitional downtime as FCT tweaked its tenant mix. On an ytd basis, tenant sales increased 1.8% yoy. Aggregate leverage has been reduced by 3.5ppt to 36.5% after divesting White Sands for S$467m.
- LREIT maintained a healthy rent reversion of 11.7% in FY26 (313@Somerset: mid-single-digit, Jem: high single-digit and PLQ Mall: high teens). Growth in tenant sales was stronger at 4.0% yoy in FY26 (9MFY26: 2.5% yoy). LREIT has further reduced its reliance on perpetual securities after issuing only S$120m of new perpetual securities to partially refinance S$200m due in Jun 26. Interest coverage ratio improved 0.5x yoy to 2.1x.
- Office: Limited supply supports positive reversions. KREIT achieved a strong positive rental reversion of 12.8% in 1H26 (Singapore: 10%, Australia: >20%). Rent reversion should improve in 2027 as the average rent of leases expiring is lower at S$11.49 psf pm. KREIT announced the divestment of KR Ginza II in Tokyo for JPY11.5b (S$91.4m). It is also exploring the divestment of T Tower in Seoul, which is valued at KRW305.4b (S$269.7m). Management intends to utilise the divestment proceeds to pare down debt and pursue unit buyback.
OVERWEIGHT (Maintained)
Analyst
IMPORTANT NOTICE - DISCLOSURES AND DISCLAIMERS
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