The REIT sector has gone through tough times in the past two years as rising interest rates and high inflation acted as headwinds.
The good news is that these headwinds may be easing as the US Federal Reserve readies itself to cut interest rates in light of favourable inflation readings.
With the pressure off the pedal, REITs should face less stress in terms of operating and finance expenses.
In turn, more REITs may be able to post higher distributable income that will lead to higher dividends.
This earnings season, we managed to tease out three Singapore REITs that managed to up their distributions despite the economic headwinds.
Mapletree Industrial Trust (SGX: ME8U)
Mapletree Industrial Trust, or MIT, is an industrial REIT with a portfolio of 56 properties in the US, 83 properties in Singapore, and one in Japan.
The REIT’s assets under management (AUM) stood at S$9 billion as of 30 June 2024.
MIT reported a resilient set of earnings for the first quarter of fiscal 2025 (1Q FY2025) ending 30 June 2024.
Gross revenue rose 2.7% year on year to S$175.3 million, boosted by the acquisition of a Japanese data centre along with new leases and renewals across its portfolio.
Although property expenses jumped 7.4% year on year, net property income (NPI) still managed a small 1.3% year-on-year increase to S$132.5 million.
Distribution per unit (DPU) came in at S$0.0343, up 1.2% year on year.
MIT has resumed its distribution reinvestment plan (DRP) for 1Q FY2025, allowing unitholders to opt for either cash or scrip.
This choice will help MIT to strengthen its balance sheet and provide it with opportunities to pursue more growth initiatives.
The industrial REIT has increased its portfolio occupancy from 91.4% in the previous quarter to 91.9% with a new lease for 402 Franklin Road in Brentwood.
The portfolio also enjoyed an average positive rental reversion of 9.2% for renewal leases.
MIT has seen impressive portfolio growth since it was listed back in FY2011, with its AUM going from S$2.2 billion to S$8.9 billion in FY2024.
The industrial REIT sported an aggregate leverage ratio of 39.1% as of 30 June 2024, giving it ample room to use debt to undertake more acquisitions.
With 82.1% of the REIT’s loans pegged to fixed rates, investors need not worry about a sharp rise in finance costs.
Parkway Life REIT (SGX: C2PU)
Parkway Life REIT, or PLife REIT, is a healthcare REIT with a diversified portfolio of 63 properties across Singapore (3), Japan (59), and Malaysia (1).
The REIT’s AUM stood at S$2.2 billion as of 30 June 2024.
For 1H 2024, gross revenue dipped by 2.7% year on year to S$72.4 million while NPI fell by 2.5% year on year to S$68.4 million.
The manager attributed the fall to the depreciation of the Japanese Yen against the Singapore dollar.
However, DPU climbed 3.5% year on year to S$0.0754.
PLife REIT continued to enjoy a very low all-in cost of debt of just 1.35% with its gearing at 35.3%.
Its interest cover ratio also stood high at 10.6 times with 90% of its loans hedged to fixed rates.
The healthcare REIT has enjoyed uninterrupted core DPU growth since its IPO in 2007.
This trend looks set to continue with close to 98.6% of the REIT’s leases having downside protection.
Its Singapore hospitals should also report organic growth with a clear rent structure in place.
For Japan, most of the nursing home leases have an “up-only” rental review provision.
PLife REIT intends to deepen its collaboration with existing and new partners and is also seeking to unlock value from optimised assets to reinvest in strategic assets with better yields.
CapitaLand India Trust (SGX: CY6U)
CapitaLand India Trust, or CLINT, is an Indian property trust with a portfolio of 10 IT business parks, one logistics park, three industrial facilities, and four data centre developments.
CLINT’s AUM stood at S$3.2 billion as of 30 June 2024.
For 1H 2024, total property income jumped 23% year on year to S$136.1 million.
NPI climbed 21% year on year to S$103.5 million while DPU rose 8% year on year to S$0.0364.
A combination of higher rental income from existing properties, positive rental reversion, and rental income from acquisitions made in 2023 helped to boost CLINT’s performance and achieve higher DPU.
Committed occupancy rose from 93% in the second half of 2023 to 96% for 1H 2024.
The REIT’s gearing ratio stood at 38.1% but its cost of debt was high at 6.2%.
Around 71% of the REIT’s loans are fixed rate ones and its interest coverage ratio came in at 2.7 times.
CLINT has a long-term growth strategy in place.
It has a development pipeline of properties in Bangalore, Hyderabad, and Chennai and is also open to third-party and sponsor-led acquisitions.
If you’re looking to buy the next S$100 billion stock in SGX, pay attention to our newest FREE report. We dug deep and uncovered which SGX companies have the potential for massive growth. Even if the numbers look great, things aren’t always what they seem. We let the numbers tell us the full story. Download for free now!
Follow us on Facebook and Telegram for the latest investing news and analyses!
Disclosure: Royston Yang owns shares of Mapletree Industrial Trust.
