REIT investors are probably smiling as REITs report their latest earnings or business updates recently.
The nascent recovery has enabled most REITs to report healthier numbers and improved financial metrics.
It’s a welcome relief for income-focused investors who fretted over the sustainability of distributions as REITs doled out tenant support measures last year.
They need not have worried, though.
REITs are structured to pay out at least 90% of their taxable income so they can enjoy tax benefits.
It was made clear that many REITs had deferred their distribution per unit (DPU) to later periods as a means of conserving cash.
Investors who kept the faith are now being duly rewarded as DPUs are improving once again.
Here are three overseas REITs that managed to grow their year on year DPU by double-digits.
Sasseur REIT (SGX: CRPU)
Sasseur REIT is a retail outlet mall REIT with a portfolio of four retail mall assets located in the cities of Chongqing, Kunming and Hefei in China.
A recovery in retail spending has boosted the variable component of the REIT’s rental income.
All four outlets in the REIT’s portfolio recorded a 21.8% year on year growth in tenant sales for the first nine months of 2021 (9M2021).
As part of Sasseur REIT’s income is tied to tenant sales, the REIT’s rental income for 9M2021 saw a 7.8% year on year rise to RMB 453.6 million.
Income available for distribution jumped by 23.9% year on year to RMB 68.6 million.
DPU increased by close to 13% year on year to S$0.05204.
The REIT’s aggregate leverage remained low at just 27.2% for 3Q2021 with a weighted average cost of debt of 4.4%.
Portfolio occupancy improved to 93.7%, up from 93.1% during the same time last year.
Sasseur REIT is undertaking asset enhancement initiatives (AEI) to boost the attractiveness of its properties.
Some of these AEI include the conversion of its Hefei mall to a sports theme with renowned brands such as Nike (NYSE: NKE) and reconfiguring the space at its Chongqing Bishan mall to improve the shopper experience.
Elsewhere, total VIP members for all four outlets has also tripled from 819,000 in 2018 to 2.5 million in 3Q2021. These VIP members contribute more than 60% of sales, thus representing an important group for the REIT.
EC World REIT (SGX: BWCU)
EC World REIT is a logistics and e-commerce REIT that owns eight industrial properties in China.
The REIT’s rental income remained resilient due to rental increases and the appreciation of the RMB.
Gross revenue for 3Q2021 increased by 10.9% year on year to S$31.6 million while net property income (NPI) rose 9.4% year on year to S$28.6 million.
DPU jumped by 19.7% year on year to S$0.01662.
EC World REIT’s portfolio occupancy remained very high at 99% with a weighted average lease expiry (WALE) of 2.8 years by gross rental income.
Aggregate leverage stood at 37.9% as of 30 September 2021 with a cost of debt of around 4% and a short weighted average debt to maturity of 0.88 years.
Five of the REIT’s properties have embedded rental escalation clauses ranging from 1% to 2.5% per annum that will provide organic rental growth for EC World REIT.
Mapletree North Asia Commercial Trust (SGX: RW0U)
Mapletree North Asia Commercial Trust, or MNACT, invests in high-quality commercial properties.
Its portfolio comprises 13 properties located in China, Hong Kong SAR, Japan, and South Korea worth around S$8.4 billion as of 30 September 2021.
MNACT reported an impressive set of financial numbers for its fiscal 2022 first half (1H2022).
Gross revenue increased by 13.3% year on year to S$215.4 million while NPI climbed by 15.8% year on year to S$161.9 million.
DPU surged by 19.1% year on year to S$0.03426.
The better result was due to lower rental reliefs granted and contribution from a property acquired in June.
Leverage stood at 41.4% while the effective interest rate remained low at 1.84%.
Portfolio occupancy remained healthy at 97.9% for 1H2022.
The REIT was also well-diversified, with no single trade sector accounting for more than 14.5% of gross rental income.
MNACT’s Festival Walk mall in Hong Kong SAR enjoyed a 22% year on year increase in retail sales for 1H2022.
Footfall improved by nearly 30% year on year during the same period, but rental reversion was negative 30% as many retailers were cautious on committing to long-term leases.
The REIT manager continues to strengthen Festival Walk’s appeal as a lifestyle hub by introducing new food and beverage and lifestyle store concepts.
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Disclaimer: Royston Yang owns shares of Nike.
