It has been a roller-coaster ride this year for REIT investors.
At the onset of the COVID-19 pandemic, REITs saw their unit prices crash swiftly back in February and March.
This was followed by a sharp rebound for some REITs as investors recognised that all was not as bad as it seemed.
Certain REIT sub-types ended up faring better than others due to the nature of their portfolios.
Naturally, retail and hospitality REITs fared the worst as their fortunes are directly tied to footfall and tourist numbers, respectively.
Commercial and industrial REITs, on the other hand, have remained fairly resilient thus far.
Although most REITs have had to reduce their distribution per unit (DPU) as part of tenant support measures, some have held up better.
As 2021 approaches, industrial REITs have been a beacon in the dark for income-seeking investors as they continue paying out stable, or even growing, dividends.
Here are three industrial REITs that are well-positioned for growth in the coming year.
Frasers Logistics and Commercial Trust (SGX: BUOU)
Frasers Logistics and Commercial Trust, or FLCT, is a REIT with a portfolio of 100 industrial and commercial properties.
These properties are located in five countries: Singapore, Australia, Germany, the UK and the Netherlands, and are valued at around A$6.2 billion as of 30 September 2020.
The REIT maintained a high occupancy rate of 97.5% and has a weighted average lease expiry (WALE) of 4.9 years.
For its full fiscal year 2020 ended 30 September 2020, the REIT reported a 53% year on year jump in revenue.
This resulted from a combination of the merger with Frasers Commercial Trust during the year and also acquisitions made by the REIT manager in both fiscal year 2019 and 2020.
Adjusted net property income (NPI) was up 46.2% year on year and DPU inched up by 1.7% year on year.
In an outlook statement released by the REIT, it affirmed that there has been no material impact to the REIT’s portfolio-to-date.
The REIT manager engages in pro-active asset recycling by divesting older assets and purchasing newer properties to add to the REIT’s portfolio.
Just last week, FLCT announced the divestment of three leasehold properties in South Australia for A$29.6 million, representing a premium of 19.4% to the properties’ book value as of the fiscal year-end.
Ascendas REIT (SGX: A17U)
Ascendas REIT is an industrial REIT under CapitaLand Limited’s (SGX: C31) stable of REITs.
As of 30 September 2020, the REIT held a total of 198 investment properties valued at S$12.95 billion.
These properties cover a range of industrial sectors, with business and science parks making up the majority at 32% of the portfolio’s value.
Around three-quarter of the portfolio is in Singapore, while the rest is spread out over Australia, the UK and the US.
For its third-quarter 2020 business update, the REIT reported that occupancy remained resilient at 91.9%, with aggregate leverage at 34.9%, leaving enough room for the REIT to gear up for further acquisitions.
The REIT has recently completed a few asset enhancement initiatives worth around S$10 million and has been growing mainly through acquisitions in the last six months.
Ascendas REIT acquired a suburban office property at 1 Giffnock Avenue in Sydney in late September for A$167.2 million.
This was followed by the acquisition of two freehold office buildings in San Francisco in the US for S$768 million in mid-November.
Both these acquisitions are expected to be DPU-accretive.
And just last week, the REIT announced yet another acquisition.
This acquisition involves a S$284 million purchase of a suburban office property in Sydney, Australia that will lengthen the Australian portfolio’s WALE and is also accretive to DPU.
Mapletree Industrial Trust (SGX: ME8U)
Mapletree Industrial Trust, or MIT, has a portfolio made up of industrial properties in Singapore and data centres outside of Singapore.
Its portfolio consists of 111 properties valued at S$6.6 billion as of 30 September 2020.
Its 84 properties in Singapore enjoy a healthy occupancy rate of 91.5%, while the REIT’s 27 data centres spread across North America are 98% occupied.
For its fiscal 2021 second quarter, MIT reported a slight increase of 1.5% year on year in gross revenue, while NPI inched up by 2% year on year.
DPU declined by just 1% year on year to S$0.031.
These results, however, don’t account fully for MIT’s late-September acquisition of a data centre and office property in Virginia, USA.
Recall that the REIT had boosted its data centre weightage back in June with the acquisition in the remaining 60% interest in 14 data centres in the US.
These acquisitions will boost the REIT’s resilience as data centres have witnessed strong demand due to the pandemic.
With aggregate leverage at just 38.1% as of 30 September 2020 and the REIT securing its very first sustainability-linked loan facility of S$300 million from OCBC Bank (SGX: O39) recently, MIT looks poised for further acquisitive growth in 2021.
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Disclaimer: Royston Yang owns shares in Frasers Logistics and Commercial Trust.
