Living in Singapore, most of us may like to visit fun places like East Coast Park, Bukit Timah, Sentosa, Orchard, and Henderson Waves during the weekends. However, some of these places may not be accessible and you’ll need a car for convenience.

So… where are our favourite convenient places to hang out? You’ve guessed it!

Shopping malls!

For this post, let’s talk about shopping malls!

First off — what are your favourite shopping malls? Mine has got to be Eastpoint Mall and Tampines 1. Eastpoint Mall is generally quiet during the late afternoons. I used to spend my afternoon reading books at their Starbucks. As for Tampines 1, the food choices are excellent! Pepper Lunch and Sushi Express! 😛

Ok, let’s get back to our objective of our post! 😂

A few days ago, I was meeting a group of friends at Tiong Bahru Plaza – home to many F&B brands such as Bun Times, Burger King, Fun Toast, Pezzo, Shi Li Fang Hot Pot and others. While walking, I realised the available spaces for patrons to eat was very limited. Most stores used a take-away concept.

source: SPHmbo

The afternoon lunch crowd was there too. Though Tiong Bahru Plaza is directly connected to Tiong Bahru MRT, the owner (PGIM Real Estate Retail) played a part to attract the right tenants in.

There are some creative shopping malls too. For example, City Square Mall located in front of Farrer Park MRT! It’s a mall developed by City Developments. You’ll find a mega Decathlon there.

source: meinhardtgroup

Why is City Square Mall creative? They dared to experiment with different concepts. For instance, they allowed Airzone (first in-door net suspended playground) to operate inside. Essentially, City Square Mall is able to “rent” out the air space inside the mall too!

Isn’t that incredible?

While Singaporeans may  disagree on which is the best shopping mall, I think we can agree that shopping malls are a favourite weekend destination. Because of that, the good shopping malls will continue to have good tenants and even a list of potential tenants waiting to come in! During recessions, some malls may be affected but heartland shopping malls will continue to see good traffic.

Malls with good location are not afraid of a lack of tenants.

During bad times, people would still need to eat, shop or de-stress by watching movies! It is still a destination for friends and families to gather. If you’re a mall operator, you would charge a base rental and a small percentage of your tenant’s sales.

However good it may sounds, buying a shopping mall yourself is really expensive!

But what if there is an investment vehicle which allows you to own shopping malls and receive stable returns of 4-7% per year? 💭

It’s more than Government Savings Bond or CPF!

source: https://cmt.listedcompany.com/slides.html

Introducing you to… Real Estate Investment Trust

Most ownership of shopping malls are structured under a REIT framework.

This means, the REIT will collect all the rentals from its tenants and distribute minimum 90% of the rental income to its unitholders. It’s fully audited, safeguarded by a trustee, and regulated by Monetary Authority of Singapore and Singapore Stock Exchange.

Anyone of us can buy units of any listed REIT. After purchase, we become minority owners and we are entitled to the quarterly dividends. Currently, some REITs provide a dividend yield of 4-7%.

List of Singapore Shopping Malls under a REIT Structure

Should you ever fear your dividends might be impacted or decline, you can visit the shopping malls and see whether their tenants are doing well! If the tenants are doing well, the REITs would be able to collect rentals then distribute back to you!  👍

The beautiful part about owning a REIT is… there’s a REIT manager who will work hard to squeeze out MORE rental income per sq ft for you!

This is done by optimizing the space available by doing a few strategies such as:

• Offering casual short-term leasing to cart booth businesses along the walkway.
• Attract businesses with small space requirement such as vending machines.
• Dividing up space into more units so that you can have more tenants. Smaller sq ft units have higher $ per sq ft.

This explains why shopping malls are so squeezy! The space is optimized to generate more rental for the owners (the REIT unitholders!!). 

If you spend a lot of money in the shopping malls, the money goes to the tenant which then, gets paid as rental to the landlord.

Wouldn’t it be nice for you to get back some of the money spent in form of dividends?

You can do it by being a shareholder of a REIT. 🤑

Myth about REITs

Most investors are AFRAID when a REIT share price declines. They assume when the share price declines, they will receive lesser dividends.

They will panic.

That is simply not true.

Using two examples of SPH Reit and Frasers Centrepoint, the formula goes like this… the distribution you receive divided by the unit price, you will get your dividend yield (annual returns!).

What if today… you bought SPH Reit at $1.08, but the very next day the price drops from $1.08 to $0.90?

Will you still get 5.2% from holding SPH REIT? The answer is yes. 

A share price can drop for any reason and it does not affect the dividends per unit.

Year-in and year-out, irregardless of how SPH Reit share price performs, as long as SPH Reit pays out $0.056 of dividends per unit, you will get your 5.2% yield.

It’s fixed from the moment you made the purchase at $1.08.

What if you decide to purchase at $0.90? What’s your yield?

You’ll take $0.056 / $0.90, which is 6.2%.

After you have made the REIT purchase, your yield can only be affected when there is lesser rental income. There are many good REITs with consistent and growing rental income year after year. So… what’s a good yield and what’s good price to buy?
We want to share more!

(RELATED: Are REITS overvalued?

How to Get Started in REITs?

I am going to give an ridiculous gift away to the readers of Kelvestor.com! Mastering the skill set to pick the best REIT has helped many people build an endless stream of PASSIVE income. YOu could be one of them.

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