My love affair with REITs began around 20 years ago when I subscribed for the initial public offering of Suntec REIT (SGX: T82U).

Back then, the retail and commercial REIT was just one of a handful of REITs listed on the Singapore stock exchange.

Fast forward to today, and my portfolio now contains many more REITs such as Mapletree Industrial Trust (SGX: ME8U), Keppel DC REIT (SGX: AJBU), and Digital Core REIT (SGX: DCRU).

Two decades of REIT ownership have allowed me to study REITs more closely to find out what makes them successful.

Here are a few lessons I learned after owning REITs for such a long period.

Quality properties = strong portfolios

The first important rule in REIT investing is to select REITs with high-quality, well-located properties.

You’ve probably heard of the saying “location, location, location” when looking to buy real estate as an investment, and it’s no different when it comes to REITs.

REITs are securitised bundles of real estate that are professionally-managed, making location an important factor to consider for a REIT investor.

Commercial buildings that enjoy high demand and retail properties that see high footfall are important for helping the REIT to weather economic storms.

For instance, CapitaLand Integrated Commercial Trust (SGX: C38U) owns high-quality downtown malls such as Raffles City and Grade A Singaporean office properties such as CapitaSpring.

The REIT reported higher gross revenue and net property income (NPI) for 2024, along with a 1.2% year-on-year rise in distribution per unit (DPU) to S$0.1088.

Then there’s Frasers Centrepoint Trust (SGX: J69U), or FCT.

The retail REIT owns nine suburban shopping malls, such as Century Square, Tampines 1, and Tiong Bahru Plaza, to name a few.

Such malls cater to the HDB catchment area and will still enjoy healthy footfall and tenant sales even during recessions.

For its recent first half of fiscal 2025 earnings ending 31 March 2025, FCT reported higher gross revenue and NPI.

Its DPU inched up 0.5% year on year to S$0.06054.

A reputable sponsor

When interest rates shot up sharply back in 2022, many REITs were caught off guard.

REIT managers struggled to manage their debt loads as loans were refinanced at higher rates.

That’s when a reputable sponsor becomes an important consideration, as these sponsors can help to bring down the borrowing costs for a REIT.

Sponsors can also provide a ready pipeline of assets that can be injected into a REIT’s portfolio, eliminating the need for the REIT manager to source externally for suitable properties.

An example of a strong sponsor is Mapletree Investments Pte Ltd, while another is CapitaLand Investment Limited (SGX: 9CI).

There have been recent acquisitions involving REIT sponsors.

FCT acquired Northpoint City’s South Wing from its sponsor Frasers Property Limited (SGX: TQ5) in a yield-accretive transaction.

Keppel DC REIT acquired two Singapore data centres from its sponsor, Keppel Ltd (SGX: BN4), late last year.

For Digital Core REIT, its sponsor Digital Realty Trust (NYSE: DLR) has a pipeline of US$15 billion of data centre assets that can be injected into the REIT once these assets are stabilised.

Tailwinds and catalysts

Finally, REIT investors should search for sustainable tailwinds or catalysts when reviewing which REITs to purchase.

These catalysts can enable the REIT to continue posting growth in its DPU despite macroeconomic headwinds or higher interest rates.

Keppel DC REIT is a good example.

The manager highlighted AI-driven trends that will continue to underpin strong data centre demand.

These trends include the emergence of generative AI and the Internet of Things, which require significantly more data storage.

The data centre REIT reported a robust set of earnings for the first quarter of 2025, with gross revenue jumping 22.6% year on year to S$102.2 million.

The REIT’s NPI climbed 24.1% year on year to S$88.1 million and DPU for 1Q 2025 grew by 14.2% year on year to S$0.02503.

Another example is Parkway Life REIT (SGX: C2PU).

The healthcare REIT enjoys strong demand for its hospitals and nursing homes in France, Japan, and Singapore because of the global ageing population demographic.

This trend ensures that occupancy will stay high at the REIT’s properties.

Parkway Life REIT reported a commendable business update for 1Q 2025 with revenue rising 7.3% year on year to S$39 million.

NPI increased by 7.5% year on year to S$36.8 million and DPU inched up 1.3% year on year to S$0.0384.

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Disclosure: Royston Yang owns shares of Suntec REIT, Mapletree Industrial Trust, Keppel DC REIT and Digital Core REIT.