In this article, we’ll be conducting a 1-vs-1 comparison between two of Singapore’s poster children in the category of retail REITs – Frasers Centrepoint Trust (FCT) & CapitaLand Integrated Commercial Trust – to see which is a better REIT to invest in for 2025.

I will be comparing these two REITs based on the following criteria and coming out with a conclusion based on the assumption that I can only invest in either one of the REITs without any consideration of valuation:

Type and Location of Underlying Property Allocation
Occupancy Rate & Weighted Average Lease Expiry (WALE)
Distribution Behaviour and Breakdown
Balance Sheet Health

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The article is best viewed on a desktop. Without further ado let’s get started.

1. Type and Location of Underlying Property Allocation

Frasers Centrepoint Trust

Frasers Centrepoint Trust is a Retail REIT that focuses on Singapore’s suburban shopping malls. While they may have foreign exposure via subsidiaries or joint ventures, those allocations are either insignificant to the performances of the REIT or have since been divested.

Apart from Singapore Sub-urban retail properties, though negligible, the REIT does have a minor allocation in offices, which arguably makes FCT one of the only Singapore Retail Property plays as most of the other retail REITs listed in the SGX are often significantly diversified across countries or types of properties.

Capitaland Integrated Com Trust

Capitaland Integrated Commercial Trust is a diversified REIT that invests mainly in offices and retail properties in Singapore. While the majority of the properties that CICT owns are located in Singapore, the REIT has been expanding overseas in the last few years.

Winner: CICT

For the metrics of underlying properties, I would prefer CICT over FCT given its diversified nature across property types. However, I would pay close attention to their expansion strategy as I am not a huge fan of overseas commercial property given the unnecessary foreign exchange risk that is associated with such moves.

That being said, as of FY2024, the management of CICT has expressed a clear mandate to cap their overseas exposure to no more than 20% with a focus only in developed markets with similar characteristics and risks to Singapore.

2. Occupancy Rate & WALE

Frasers Centrepoint Trust

Frasers Centrepoint Trust’s occupancy rate has been resilient and is operating near 100% occupancy rate based on the latest annual report figures.

That said, the occupancy rate might come down slightly moving into FY2025 and FY2026 given the Asset Enhancement Initiatives for Hougang Mall which will result in a loss of income and tenancy during this period.

Their weighted lease expiry has also experienced an improvement over the years. While the low WALE figure may be a cause of concern for some, I do not think investors need to be too worried about it given the defensiveness of Singapore’s retail properties.

Capitaland Integrated Com Trust

Capitaland Integrated Commercial Trust's occupancy rate has improved significantly over the years as a result of the recovery in the office occupancy rate. Its retail and integrated development properties have always exhibited resilient occupancy behaviour.

That said, we do observe a slight dip in the occupancy rate in their offices from 2023 and 2024 due to industrial headwinds – i.e. downsizing and offshoring of companies – which resulted in lower occupancy rates across offices and business parks.

Unfortunately, the headwinds are likely expected to persist in the office space as companies are increasingly becoming more cost-conscious and are less likely to expand their physical footprint unnecessarily.

The weighted average lease expiry of CICT has been decent, largely thanks to the higher WALE of office and integrated properties helping to bring up the lower WALE nature of retail properties.

Winner: FCT

For the metrics of property resiliency, I would prefer FCT over CICT as while the overall WALE is lower, the defensive nature of Singapore retail properties and hence that of FCT is much preferred over a higher economic cycle sensitivity of CICT.

In the case of FCT, the lower WALE can be viewed as a favourable factor as it provides the manager more opportunities to initiate rental reversion when the tenancy agreement is up.

While CICT is much more diversified as compared to FCT, ironically, the office exposure might end up dragging down the overall performance of CICT due to the industrial headwinds in the office sector.

3. Distribution Behaviour & Breakdown

Frasers Centrepoint Trust

Despite the resiliency in underlying property performances, the distribution of FCT has experienced a dip from 2022 as a result of the impact of higher borrowing costs and loss of income as a result of asset enhancement initiatives in Tampines 1.

This has not been reflected in the reported dividend distributed as the reduction in DPU from Operations is padded by the increase in Management Fees Paid in Units. Looking at the current interest rate environment and the future Hougang Mall AEI, I expect the DPU from operation of FCT to continue to remain depressed for FY2025 and FY2026.

Capitaland Integrated Com Trust

As a result of the recovery of the office properties, the distribution from operations has improved over the years. This came despite the higher interest rate environment which had caused borrowing costs to increase drastically and distribution to fall among the REITs listed in SGX.

The calculated figures in 2024 on my model are affected by the increase in units as a result of rights issuance to acquire a 50% stake in ION Shopping Mall that was completed in Oct 2024. Disregarding the impact of the dilution, DPU from operations have improved at the back of stronger Net Property Income from positive rent reversion.

Winner: CICT

For the metrics of distribution behaviour and breakdown, I would prefer CICT over FCT given its commendable performance over the past few years, largely contributed by the recovery of their office properties.

Unlike FCT which is already operating near full occupancy, CICT still have some room for organic growth from a higher occupancy rate though investors should take into consideration that the higher potential DPU organic growth comes with a higher risk of a lower occupancy rate in an event where the economy slows, which is what we’ve experienced in FY2024.

That said, both DPU performances will be vastly affected by acquisitions and AEI in FY2024/2025 of which a fair comparison can only be made beyond FY2026 once the finances have stabilized.

4. Balance Sheet Health

Frasers Centrepoint Trust

The financial health of Fraser Centrepoint Trust has deteriorated largely due to the higher interest rate environment which resulted in a higher average cost of debt and lower interest coverage ratio.

Capitaland Integrated Com Trust

The financial health of Capitaland Integrated Commercial Trust has deteriorated largely due to the higher interest rate environment which resulted in a higher average cost of debt and lower interest coverage ratio.

Winner: Tie

For the metrics of financial health, I would say that both FCT and CICT are comparatively healthy. While the gearing ratio is nearing the 40% limit that I am comfortable with, both management have acknowledged the deterioration of the financial health and have since taken action to manage it.

Overall Winner: CICT

If I could only invest in either FCT or CICT, I would choose Capitaland Integrated Commercial Trust as they are more diversified than FCT (in terms of types of properties) and have a higher potential for organic DPU growth as the occupancy rate improves.

That being said, I’d pay close attention to the health of CICT and how they will navigate the portfolio in the future with their intention to expand overseas as unlike Singapore properties, investing in off-shore commercial properties carry a much higher risk.

All things considered, when designing a REIT portfolio, things aint as simple as choosing one REIT over another, investors need to understand how each REIT will perform and contribute at a portfolio level to determine whether a REIT is investible and if so what should be the ideal allocation on a portfolio level.

I’ve written more extensively on my REIT investment methodology and how I go about designing, implementing and managing a profitable REIT portfolio for myself which you can grab a copy of for free here: