Singapore REITS rental income to average 4.2% in 2011

S-REITs are forecasted to deliver FY10-12F DPU CAGR of 5.5% - 9.2%, which is above inflation.

According to DBS, S-REITs collectively delivered 11% y-o-y distribution growth in 4Q10. 4Q10 results were a continuation of the strong showing in 3Q10 with the sector reporting topline, net property income and distributable income growth of 10%, 13% and 11% respectively. Hospitality REITS continued to outperform with strong organic driven growth while acquisitions completed during the course of 2010 lifted distributions for the remaining S-REITs.

While retail and industrial S-REITs continue to deliver single digit growth, Office REITs reported weaker results both y-o-y and q-o-q, as passing rents remained below the peak rents signed in 2007-2008. We expect this trend to continue in the coming quarters, only to reverse in 2012.

DBS believes that S-REITs are good inflation hedges given their ability to grow rental income above inflation. DBS maintains their view that Hospitality REITs will continue to exhibit the strongest earnings potential stemming from expectations of strong tourists arrivals in 2011.