The REIT sector is seeing improved sentiment as the US Federal Reserve initiates its first interest rate cut since 2020 of 0.5 percentage points.
With interest rates poised to fall more in the coming months, REITs should enjoy more respite from the high interest costs that is crimping their distributable income.
Despite the tough conditions, some REITs are still actively managing their portfolios through capital recycling and acquisitions.
Over time, investors should hope for higher distributions as conditions ease into 2025.
Here are three attractive Singapore REITs to keep your eye on in October.
Mapletree Logistics Trust (SGX: M44U)
Mapletree Logistics Trust, or MLT, is an industrial REIT with a portfolio of 188 properties spread across eight countries.
MLT had assets under management (AUM) worth S$13,4 billion as of 30 June 2024.
The REIT reported a weak set of earnings for the first quarter of fiscal 2025 (1Q FY2025) ending 30 June 2024.
Revenue dipped 0.3% year on year to S$181.7 million while net property income (NPI) fell by 0.9% year on year to S$156.7 million.
The REIT’s performance was adversely impacted by weaker China contributions, absence of revenue from divested properties, and currency weakness for both the Renminbi and Japanese Yen.
As a result, distribution per unit (DPU) tumbled by 8.9% year on year to S$0.02068, exacerbated by a 9.4% year-on-year jump in finance costs.
Portfolio occupancy, however, stood high at 95.7% while the REIT also registered a positive rental reversion of 2.6% for the quarter.
Earlier in September, MLT announced the divestment of three properties – Linfox, Celestica Hub and Zentaline, in Malaysia
The aggregate sale price for these three properties is RM 157.5 million, or around S$47.7 million.
These divestments are in line with the manager’s strategy to rejuvenate the portfolio through selective divestments to free up capital to allow MLT to invest in high specification, modern logistics properties.
Linfox was divested at a 28.6% premium to its latest valuation of RM 56 million while Celestica Hub was sold at 2.9% above its latest valuation of RM 42 million.
As for Zentraline, it was divested at 1.9% above its latest valuation of RM 41.5 million.
These divestments should be completed by the end of fiscal 2025.
Digital Core REIT (SGX: DCRU)
Digital Core REIT, or DCR, is a data centre REIT with a portfolio of 10 data centres with an AUM of US$1.4 billion.
The portfolio occupancy stood at 97% as of 30 June 2024.
DCR also reported a downbeat set of earnings for the first half of 2024 (1H 2024).
Gross revenue fell by 9.6% year on year to US$48.3 million primarily due to the sale of two Silicon Valley properties in January this year.
NPI fell 13.4% year on year to US$30.4 million while DPU slid 6.3% year on year to US$0.018.
In early September, DCR announced the planned acquisition of an additional stake in its Frankfurt data centre.
The REIT currently owns a 49.9% stake in this facility.
The acquisition will involve the purchase of between 0.2% and 40% of the data centre with a view to acquiring a 10% stake based on current market conditions.
The cost will range from €0.9 million to €188 million for a 0.2% and 40% stake, respectively.
This data centre is currently 98.5% occupied with 22 customers and has a weighted average lease expiry of 5.8 years by annualised rent as of 30 June 2024.
Assuming DCR acquires a 10% stake in the Frankfurt data centre, DPU will rise by approximately 1.7%.
The data centre REIT also sees opportunity for positive rental reversions once leases expire.
CapitaLand Integrated Commercial Trust (SGX: C38U)
CapitaLand Integrated Commercial Trust, or CICT, is a retail and commercial REIT with a portfolio of 26 properties in Singapore (21), Germany (2), and Australia (3).
The REIT’s AUM stood at S$24.5 billion as of 31 December 2023.
CICT reported a respectable set of earnings for 1H 2024 with revenue inching up 2.2% year on year to S$792 million.
NPI increased by 5.4% year on year to S$582.4 million while DPU improved by 2.5% year on year to S$0.0543.
The REIT also reported resilient operating metrics with committed portfolio occupancy hovering at 96.8%.
Both its retail and office segments enjoyed positive rental reversions of 9.3% and 15%, respectively.
In early September, CICT announced the acquisition of a 50% interest in ION Orchard mall for a total acquisition outlay of S$1.1 billion.
This property has a gross yield of around 7.1% and will consolidate CICT’s retail presence in the downtown precinct.
The purchase will also help CICT to expand its retail offerings with the introduction of new-to-portfolio tenants along with new concepts.
CICT will rely on a mixture of debt and equity to fund the purchase and expects 1H 2024 DPU to improve by 0.9% to S$0.0548 with leverage remaining stable at 39.9%.
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Disclosure: Royston Yang owns shares of Digital Core REIT.
