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Hey fellow REIT investors! Today I want to talk about the long term. With REITs currently trading at relatively stable prices (yes, we mean depressed but stable prices!), I think this presents a great opportunity to build an attractive and well-balanced REIT portfolio for the long term. This applies whether you’re starting fresh with zero REIT exposures or you’re adjusting your holdings by divesting weaker positions and reinvesting into stronger, better opportunities.

That’s exactly why I started with my previous post on my top 4 Core REITs, which focused on stable, long-term holdings that form the foundation of my REIT portfolio. I must say that my this video on YouTube was really well received! I had so many great comments and discussions with fellow investors, which made this uncle very happy – that’s the reason I started this channel in the first place. Thank you for your support!

But core REITs alone may not be enough for a well-balanced portfolio. If you’re like me, you probably also want to enhance your portfolio returns, whether through higher dividend yields or stronger capital appreciation potential. That’s where satellite REITs come in.

So today, let’s dive into 5 REITs that I’ve placed in my satellite portfolio. These REITs typically carry higher risk but also offer higher potential rewards. Their dividend yields can be above 8%, compared to the 4% to 6% dividend yields from the core REITs.

Now, before you conclude that you don’t want to have anything to do with riskier REITs, let me explain why we shouldn’t look at them in isolation. A riskier REIT may not be suitable as a standalone investment, but it can play a valuable role within a well-diversified portfolio. By combining both core and satellite REITs, we can balance stability with higher income or growth potential.

I mean that a satellite REIT strategy works best as part of a balanced portfolio. The typical 70-30 rule applies: about 70% of your REIT allocation is in core holdings, with the remaining 30% allocated to higher-risk satellite REITs to boost your overall returns.

If you haven’t read my Core REITs post, check it out later: it provides a strong foundation for today’s discussion. But for now, I’ll be sharing my 4 Satellite REITs that I’ve chosen based on their potential for strong returns, whether through higher dividend income, capital appreciation, or both. And at the end, I have 1 bonus REIT that could have been in the core portfolio, but for now, I’m keeping it in the satellite bucket. I’ll explain why later.

Before we dive in, let me remind you that this post is for informational purposes only and not financial advice. Always consult a licensed financial adviser to ensure your decisions align with your goals. And yes, I hold these REITs in my portfolio, but remember, what works for me might not work for you.

Alright, let’s get started!

CapitaLand China Trust – Looking to Catch Up with the Chinese Stock Rally

The first satellite REIT I want to highlight is CapitaLand China Trust, or CLCT. It has to be one of the strongest Singapore-listed REITs to offer direct exposure to China’s retail, business parks and logistics sectors. Now, let’s be clear. Even when I say “strongest”, everything is relative. China-related shares have not been doing well for the past two years. Since 2022, its share price has plunged about 40%. 

There are two key reasons CLCT is the first REIT in my satellite portfolio. The first reason CLCT is attractive? A high dividend yield of around 8.5%. But let’s be clear: this high yield reflects the pressures on its share price, which has been under pressure due to weaker performance in some of its segments.

If you’ve been following CLCT’s latest financial results, you’d know that its Net Property Income or N.P.I. for FY2024 dropped by 5.8%, which in turn led to a D.P.U. decline of 16.2%. That’s a pretty significant drop, and it mainly comes from continued weakness in its business parks and logistics properties. Unlike its retail segment, which has been more stable, these parts of the portfolio are still struggling due to lower demand.

The second, more exciting reason why CLCT is attractive is that while China’s real estate market has been weak for some time, recent improvements in sentiment around Chinese equities could provide a much-needed boost.

If you’re like me and have been holding onto Chinese stocks or ETFs, you’ve probably started seeing some green in your portfolio for the first time in years! My Hang Seng Tech ETF is finally making me money after years in the doldrums, and those who bought individual Chinese tech stocks like Alibaba, would have done even better.

Why does this matter for CLCT? Rising confidence in Chinese markets could spill over into consumer sentiment and spending, which benefits retail and logistics assets in the long run. If the Chinese government continues to be more supportive of businesses, that could also stabilize the broader commercial real estate sector.

So, while CLCT comes with risks, its current valuation and yield could be attractive for investors willing to take a longer-term view. The question is whether you believe China’s economy is on the path to recovery.

Stoneweg European REIT – Top Performing REIT With Favorable Interest Rate Trends

Stoneweg European REIT had an incredible 2024, it was among the top 3 best-performing S-REITs, outperforming the S-REIT index by 22%.

This REIT focuses on office and logistics/ light industrial properties in Europe, and its standout story? A stabilizing portfolio poised for growth. For FY 2024, net property income was down a small -2.3%,  despite broader concerns over the European economy. While distributable income was down 10.1%, this was largely due to asset divestments and the higher borrowing costs from previous rate hikes. With property performance improving and strategic asset management efforts in place, the REIT seems to be in a stronger position than it was a year ago.

At the same time, the interest rate outlook in Europe could provide further support. Unlike the U.S., where the Federal Reserve is still debating when and how aggressively to cut rates, the European Central Bank or ECB is expected to continue cutting rates, in 2025, possibly as soon as March. Inflation in the Eurozone has been easing faster than in the U.S., and economic growth has been more sluggish, increasing the pressure on the ECB to act. This contrast is important because while U.S. rate cuts remain uncertain, European REITs could see financing costs decline sooner, providing a potential advantage. Lower interest rates mean lower borrowing costs, improved distributable income, and possibly better sentiment for the stock price.

The dividend yield? A solid 9%, making it one of the highest-yielding REITs on this list. Personally, this has been one of my top performers, and I continue to monitor its macro trends closely.

Daiwa House Logistics Trust – Stable Dividends with Strong Sponsor 

Daiwa House Logistics Trust or D.H.L.T. continues to be one of the most interesting REITs in the S-REIT space, offering a rare combination of a strong sponsor, a defensive logistics portfolio, and low financing costs.

One of the biggest positives for D.H.L.T. is its cost of debt, which is the lowest among all S-REITs. As of the latest financial update, its average interest rate stands at just 1.66%. This is an incredible advantage in today’s environment, where many REITs are struggling with rising borrowing costs. While other S-REITs are paying interest rates in the 3% to 4% range, D.H.L.T. benefits from Japan’s ultra-low rate policies, which have helped keep its financing costs exceptionally low.

Beyond its financial structure, D.H.L.T. is also expanding its geographical footprint with the help of its sponsor, Daiwa House. Recently, the REIT made its maiden foray into Vietnam, acquiring a logistics property in Binh Duong. This move signals D.H.L.T.’s ambition to grow beyond Japan, tapping into Vietnam’s rapidly growing logistics sector, which has been booming due to strong manufacturing and e-commerce growth.

Of course, there are risks to watch out for. The most immediate one is the Bank of Japan potentially raising interest rates after years of ultra-low rates. However, rather than viewing this as a purely negative development, it’s actually a sign that Japan’s economy is improving, which could benefit the logistics sector in the long run. In addition, it has hedged 99.2% of its debt, that’s almost everything! 

Some investors might be concerned about currency fluctuations since D.H.L.T. earns revenue in Japanese Yen, while its stock trades in Singapore Dollars. But this risk is largely mitigated, as D.H.L.T. actively hedges its currency exposure, reducing the impact of forex volatility on its distributions.  

Despite these risks, the dividend yield remains highly attractive at about 8.5%, making it one of the best-yielding logistics REITs available to Singapore investors. Given its low interest costs, strong sponsor backing, and expansion into high-growth markets like Vietnam, D.H.L.T. remains a compelling satellite REIT for those looking for high-yield logistics exposure.

Before we move on to the last 2 surprising REITs for my satellite, please give this uncle your support by tapping on the ‘like’ button! It’s free of charge, but it keeps me motivated to bring you more in-depth analyses! I really appreciate it! 

Keppel Pacific Oak US REIT – A 2025 Turnaround Play?

Keppel Pacific Oak US REIT or KORE carries both high risks and potential rewards, making it the most speculative REIT on this list.

Right now, dividends are at ZERO. That’s right, this REIT is not paying dividends because it paused payouts to conserve cash amid rising financing costs. Naturally, this has dragged down my Satellite portfolio’s overall dividend income.

But why am I still holding it?

Because 2025 could be the turnaround year. Analysts expect dividends to resume in 2026, with a yield of 7% to 8%. Now, I know what you’re thinking: 7 to 8% isn’t very attractive, given that we’ve had to forgo dividends in the meantime. But this is not just about dividends, it’s also about potential capital appreciation if the sector recovers.

The office market in the US is still struggling, but here’s what’s keeping me as an investor in the REIT. Firstly, financial and government sectors are accelerating return-to-office mandates, which could improve office demand. Secondly, despite the challenges, its occupancy remains solid at 90%, with only a mild rental reversion of -0.5%. Thirdly, Despite FY2024 distributable income falling by 8.8%, that’s actually mild compared to the worst fears investors had.

But, let’s be real. US office REITs are the most hated asset class right now, and there are valid reasons for that. High interest rates remain a problem – Even though the US Fed has hinted at more rate cuts, there are inflationary pressures that are starting to emerge. Hence, financing costs remain elevated. Then any US companies are still figuring out their office space needs, and some are cutting down on office leases, which adds uncertainty. And finally, market sentiment is still weak. Investors are not rushing back into US office REITs, and it may take time for confidence to return.

But with the REIT’s portfolio proving to be more resilient than expected, and with the potential for dividends to be reinstated at a very high yield, this is one of the most extreme risk-reward opportunities in my satellite portfolio.

Hence, given the risks, the key is to cap my exposure size. This is not a REIT to go all-in on, but one to consider as a high-risk turnaround play.

Bonus REIT: Mapletree Logistics Trust – A Core-Satellite Hybrid

Lastly, we have Mapletree Logistics Trust or MLT. You may ask why such a REIT behemoth is doing in my satellite portfolio? But you might have also heard of the tremendous challenges it is currently facing, especially with the China logistics sector. As a result, I’ve placed it in my satellite portfolio for now.

I’ve done a deep-dive into MLT after its Q4 2024 financial reporting in an earlier post, and concluded that despite the oversupply risks in China, its other sectors have remained resilient. Take a read at the post if you’re interested in knowing more. In my view, it remains one of the best-managed logistics REITs in Singapore. But it’s been hit hard by weak market sentiment towards China logistics. 

However, MLT’s diversified portfolio, attractive yield of 6.8% and long-term recovery potential make it an eventual candidate for my core REITs. For now, it stays in the satellite portfolio as I monitor its developments closely for my portfolio, and for you, my fellow REIT investors.

The Dividend Uncle’s Take

When it comes to satellite REITs, the key is knowing how to approach them as an investor. Unlike core REITs, which are more stable and meant to form the foundation of your portfolio, satellite REITs require a bit more attention. They can offer higher yields or better capital appreciation potential, but they also come with higher risks, whether it’s from economic cycles, interest rate sensitivity, or country-specific factors.

So, how should you approach them? First, position sizing is crucial. If you’re a conservative investor, you might not want to go beyond 20% to 30% of your REIT allocation in satellite REITs. If you’re more aggressive, you might go higher, but only if you’re comfortable handling the volatility that comes with it.

Second, active monitoring is necessary. Unlike core REITs, which you can hold with minimal intervention, satellite REITs require regular check-ins. These are the ones where a sudden change, like a defaulting major tenant, rising debt costs, or poor economic conditions, can cause major price swings. This means keeping an eye on quarterly reports, key macroeconomic trends, and management updates.

And third, know what you’re holding them for. Some satellite REITs might be for yield, some for a recovery play, and some for long-term upside. If the reason you originally bought a satellite REIT is no longer valid, don’t hesitate to reassess or exit.

Now, I know some of you might be wondering, how do I personally position these core and satellite REITs in my portfolio? What’s my thought process when deciding how much to allocate? Well, that’s a topic for another day! I’ll probably be covering how I manage my satellite REIT exposure and how I rebalance between core and satellite REITs in a future post, so make sure you subscribe to the channel so you don’t miss it!

Before I go, I want to quickly share a new feature on REIT-tirement.com that I think you’ll find really useful. It allows you to select and compare up to 5 REITs side by side, based on key metrics like dividend yield, price-to-NAV, lease profile, gearing ratio, cost of debt, and more, all in one glance. I’ve already plugged in the 5 satellite REITs we just discussed, and you can instantly see how they stack up. The color-coded display makes it easy to spot which REITs are performing better or worse in different areas. 

Not to worry, it’s completely free, no sign-ups, no hidden fees. And just to be clear, this uncle isn’t getting paid to promote this. I only share tools that I genuinely find useful. I will never compromise the quality of my posts with paid promotions. My goal has always been to bring you the best insights and resources to make better investment decisions. So check it out and see if it helps your REIT investing!

Now, what do you think? Are any of these satellite REITs in your portfolio? Let me know in the comments! And if you found this useful, hit the like button.

Again, this is just my personal portfolio and views; not a recommendation. Always do your own research and consult a financial adviser before making any investment decisions.

Until next time, happy investing!