REITs are prized for their consistent income-generation capability.
For instance, during the Global Financial Crisis more than ten years ago, many REITs continued to pay out regular dividends to unitholders.
Granted, there were a few weaker ones that ran into trouble refinancing their debt load and had to rely on dilutive rights issues to shore up their balance sheets.
Fortunately, during the current pandemic, REITs are not facing a problem with survival.
However, several REITs have slashed their distribution per unit (DPU) to conserve cash for tenant support measures as a result of lockdowns and movement control restrictions.
The well-managed REITs are not standing still, though.
REITs have several methods of growing their DPU, and acquisitions are a core strategy used by many well-established REITs.
Even during this pandemic, these three REITs have managed to conduct acquisitions to boost returns for their unitholders.
Mapletree Industrial Trust (SGX: ME8U)
Mapletree Industrial Trust, or MIT, is a REIT that invests in industrial properties in Singapore and data centres in the US.
Its portfolio comprises 87 industrial properties in Singapore and 27 data centres in North America.
As of 31 March 2020, MIT’s portfolio was valued at S$5.9 billion.
In late June, the REIT announced that it will acquire the remaining 60% interest in 14 data centres in the US for US$494 million.
MIT currently holds a 40% interest in these data centres through Mapletree Redwood Data Centre Trust.
With this acquisition, MIT will own 100% of the 14 data centres.
This is not the REIT’s first foray into data centres.
In September last year, MIT and its sponsor, Mapletree Investments Pte Ltd, entered into a 50:50 joint venture to acquire a US$1.4 billion data centre portfolio in the US from Digital Realty.
The most recent acquisition increases MIT’s exposure to the data centre segment to 39% of its assets under management.
DPU is expected to increase by 3.4% from S$0.1224 to S$0.1266 upon completion of the acquisition.
Ascendas REIT (SGX: A17U)
Ascendas REIT, or A-REIT, is Singapore’s first and largest business space and industrial REIT.
The REIT’s assets under management stood at S$12.8 billion as of 31 March 2020 and comprises 197 properties spread out across Singapore, Australia, the UK and the US.
On 1 July, A-REIT announced the acquisition of a new logistics property in Sydney, Australia, for A$23.5 million.
The purchase consideration is a 19.8% discount to the market valuation of the property as of 30 June 2020.
After transaction costs, the estimated net property income yield for the property is around 5.8%.
This acquisition is expected to benefit A-REIT’s portfolio as it is a prime-grade logistics warehouse located on freehold land.
The total lettable floor area is around 13,100 square metres and caters to a wide range of tenants, thereby minimizing the risk of an extended period of zero occupancy.
Cromwell European REIT (SGX: CNNU)
Cromwell European REIT, or CEREIT, is a REIT that invests in properties in Europe that are used for office, light industrial or retail purposes.
Its portfolio consists of 94 properties located in countries such as Denmark, Finland, Poland and Germany.
As of 31 March 2020, CEREIT’s portfolio was valued at around EUR 2.1 billion.
Just this week, the REIT announced that it had agreed to co-invest (along with its sponsor Cromwell Property Group and Stratus Data Centres) into 50% stakes in two data centre projects.
The first data centre serves London and will be powered by renewable energy. Construction is expected to be completed in 2021.
The second data centre serves Frankfurt, Germany. It is a 300-megawatt project and once completed, will be one of the largest data centres in Germany and West Europe.
This partnership represents a new and promising division for CEREIT and will combine Stratus’ data centre specialisation (being the party that develops, designs, constructs and leases the data centre) with Cromwell Property Group’s capital resources and investment funding.
These projects are just a beginning, with plans to develop more of such data centres in key cities such as Dublin, Milan, Tokyo, Manila, Jakarta and Mumbai.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
