The first four months of 2023 passed by in a flurry.
May will welcome a new batch of earnings from both REITs and non-REIT companies.
For income-seeking investors, their best bet is to continue to park money in well-managed REITs with quality assets and strong sponsors.
REITs continue to be dependable sources of regular and consistent dividends that can deliver a stream of passive income.
The REIT sector has faced significant headwinds with inflation causing a rise in operating expenses while surging interest rates have increased borrowing costs.
Still, several REITs have undertaken capital recycling activities to optimise their portfolios while reporting sturdy operating metrics.
We highlight three REITs that you may want to include in your REIT buy watchlist.
AIMS APAC REIT (SGX: O5RU)
AIMS APAC REIT is an industrial REIT with 29 properties in Singapore and Australia worth S$2.3 billion as of 31 December 2022.
These properties comprise business parks, Hi-tech buildings, and logistics & warehouse assets.
AIMS APAC REIT enjoyed a high occupancy of 97.8% with a long weighted average lease expiry (WALE) of 4.5 years.
Its fiscal 2023’s third quarter (3Q FY2023) earnings ending 31 December 2022 were encouraging, with revenue rising 14.1% year on year to S$42 million.
Net property income (NPI) improved by 14% year on year to S$30.9 million while distribution per unit (DPU) jumped 10.2% year on year to S$0.0259.
The industrial REIT’s annualised DPU stood at S$0.1036, giving its units a forward distribution yield of 7.6%.
The REIT’s aggregate leverage stood at 36.4% with 88% of its loans on fixed rates, thus mitigating a sharp rise in finance costs.
As part of its capital recycling activity, the manager divested 541 Yishun Industrial Park A in late April for S$12.88 million.
This sale price was at an 8.2% premium to the property’s valuation of S$11.9 million and the proceeds will be used for asset enhancement initiatives (AEIs), redevelopments, and potential acquisitions.
Leasing momentum remained strong with the AIMS APAC REIT executing 11 new and 16 renewal leases during the quarter, representing 6.7% of the portfolio’s net lettable area.
For 3Q FY2023, the rental reversion was also very strong at 21.2% with the REIT enjoying a tenant retention rate of 79%.
The industrial REIT is set to release its FY2023 earnings on the morning of 5 May.
iREIT Global (SGX: UD1U)
iREIT Global invests in a portfolio of properties used for office, retail and industrial purposes across Europe.
The REIT’s portfolio comprises five office properties in Germany, five in Spain, and 27 freehold retail properties in France.
iREIT Global released an encouraging business update for its fiscal 2023’s first quarter (1Q 2023) ending 31 March 2023.
Portfolio occupancy stood high at 87% with a WALE of 4.8 years.
The portfolio also enjoyed a positive rental reversion of 3.4% year on year due to step-up rents that are pegged to inflation.
The REIT’s gearing stood at 32.3% with a healthy interest coverage of 7.6 times along with a low cost of debt of just 1.9%.
iREIT Global also boasts blue-chip tenants such as Decathlon, DXC Technology (NYSE: DXC), and Allianz SE (ETR: ALV).
Just last month, the manager signed a 15-year lease with a German federal government body for 25% of the Darmstadt Campus.
This lease commences on 1 June 2023 and will help to increase occupancy to 90.3% and WALE to 5.2 years.
CapitaLand Ascendas REIT (SGX: A17U)
CapitaLand Ascendas REIT, or CLAR, is an industrial REIT with a portfolio of 229 properties worth S$16.7 billion as of 31 March 2023.
The REIT boasts a healthy aggregate leverage of 38.2% with nearly three-quarters of its debt on natural hedges.
Portfolio occupancy stood high at 94.4% while portfolio rental reversion came in at positive 11.1%.
CLAR had a portfolio WALE of 3.8 years by gross revenue.
The industrial REIT has a total of S$617.4 million worth of ongoing projects across Singapore, Australia, and the US that can help to drive DPU in the medium term.
Back in 2022, CLAR saw its DPU rise 3.5% year on year to S$0.15798 on the back of a 10.3% year on year rise in gross revenue and a 5.2% year on year improvement in NPI.
The industrial REIT’s units sport a trailing distribution yield of 5.5%.
Last month, CLAR announced that it had divested KA Place in Singapore for S$35.4 million, more than triple what the property was purchased for back in March 2005.
The sale price was also 55% higher than the market valuation of S$22.8 million as of 31 December 2022.
This divestment is in line with the manager’s proactive asset management strategy that seeks to recycle capital into higher-yielding assets with better future potential.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
