It just got a little more crowded last week in the Central Business District.
Singapore had announced a further easing of COVID-19 measures that now allow larger groups of 10 to gather and dine in.
Up to 75% of employees are also allowed back into their offices, up from 50% before the relaxation.
Other countries are also reopening their borders as their economies enjoy a gradual recovery.
The pandemic had pushed businesses to pivot towards remote work, making telecommuting the norm.
But with the opening up of the economy, demand for office space should rise in tandem as businesses welcome staff back into the office for brainstorming and collaborative projects.
Commercial REITs stand to benefit from this trend.
Here are three promising office REITs that are paying out a distribution yield of 6% or more
Manulife US REIT (SGX: BTOU)
Manulife US REIT is a US office REIT that owns a portfolio of 12 freehold office properties in seven states in the US.
The portfolio has a net lettable area (NLA) of 5.4 million square feet and is valued at US$2.2 billion as of 31 December 2021.
For its fiscal 2021 (FY2021), Manulife US REIT reported a 4.7% year on year dip in gross revenue to US$185.1 million.
The decline was due to lower rental income from higher vacancies, lower car park income, and higher amounts of rental abatement doled out to tenants.
Net property income (NPI) fell by 5.4% year on year to US$109.5 million while distribution per unit (DPU) slid 5.5% year on year to US$0.0533.
At the REIT’s last traded unit price of US$0.675, the DPU represents a historical yield of around 7.9%.
Despite the fall in NPI and DPU, Manulife US REIT continued to register healthy occupancy of 92.3%.
Gearing stood at 42.8% with a cost of debt of 2.8% as of 31 December 2021.
The REIT had just acquired three properties worth around US$202 million that should add 2.8% to its DPU moving forward.
The US office market is seeing a strong recovery in the fourth quarter of 2021, with both base and net rents on an upward trend.
Valuation for the REIT’s portfolio of properties also turned positive for the first time since the pandemic broke out in early 2020.
Prime US REIT (SGX: OXMU)
Prime US REIT owns income-producing office properties in the US.
It has a portfolio of 14 freehold office properties located in 13 markets in the US, with a total valuation of US$1.65 billion as of 31 December 2021.
Gross revenue for FY2021 increased by 9.2% year on year to US$156.7 million while NPI rose by 6% year on year to US$100.7 million.
The better performance was due to contributions from acquisitions of Sorrento Towers in San Diego and One Town Center in Boca Raton.
However, DPU dipped by 2.3% year on year to US$0.0678 as positive rental reversions were offset by lower occupancy.
The REIT provides a distribution yield of 8.9% based on its last traded unit price of US$0.76.
Aggregate leverage stood at 37.9% with a weighted average interest rate of 3%.
Portfolio occupancy remained healthy at 90.5%, above the average Class A US office occupancy rate of 83.5%.
Prime US REIT has plans for asset enhancement initiatives and also enjoys ample liquidity with undrawn debt facilities of over US$230 million.
OUE Commercial REIT (SGX: TS0U)
OUE Commercial REIT, or OUECR, is a commercial cum hospitality REIT that owns seven properties in Singapore (6) and Shanghai, China (1).
The REIT has total assets worth S$5.8 billion as of 31 December 2021 with more than 2.1 million square feet in NLA.
For FY2021, revenue declined by 14.4% year on year to S$249.9 million while NPI fell by 11.9% year on year to S$204.2 million.
DPU, however, climbed by 7% year on year to S$0.026.
OUECR’s historical distribution yield stands at 6.2% based on its last traded unit price of S$0.42.
The committed occupancy for its office properties stood at 91.2% with passing rents moving upwards year on year in December 2021.
For its hospitality segment, the fourth quarter of 2021 saw revenue per available room (RevPAR) increase by 23% from the previous quarter to S$113.
Gearing for OUECR stood at 38.7% with an average cost of debt of 3.2%.
The reopening of borders should benefit its Hilton Singapore Orchard property, which officially reopened in February this year.
With safe management measures easing, committed occupancy for OUECR’s commercial properties should also enjoy gradual improvement.
Not sure which REIT to put your money in? Use our 7-step REIT checklist to find one that fits into your retirement plan. Checklist is inside our latest FREE report “Singapore REITs Retirement Plan”. Click here to download it now.
Disclaimer: Royston Yang does not own shares in any of the companies mentioned.