According to the report, S-REITs with the greatest buffer to the 50% gearing limit set by the Monetary Authority of Singapore are CapitaLand Ascott Trust (CLAS), Frasers Logistics and Commercial Trust, Digital Core REIT, Keppel DC REIT and Frasers Centrepoint Trust.
In a report on S-REITs, Bank of America (BofA) points out that average sector leverage as at FY2022 stands at 38%, a touch lower than the 39% seen in 1H2008 during the Global Financial Crisis.
“Assuming physical yield spreads (against bond yields) revert to historical average levels, we estimate cap rates would need to expand by 50–100 bps, implying a 10– 15% decline in capital values, or 5-10 percentage points (ppt) increase in average gearing ratios,” BofA notes.
