Industrial REITs have proven to be a bastion of strength during tough times.
This property sub-class has performed better than retail or commercial REITs during the pandemic as lockdowns affected malls and work-from-home options negatively impacted office occupancy.
Hence, it is not surprising to see investors keeping faith in the industrial sector as e-commerce demand remained strong, thereby lifting demand for industrial facilities and logistics warehouses.
However, industrial REITs are also facing a double whammy of high inflation and surging interest rates.
Despite these headwinds, industrial REITs appear to be holding their own, with a handful offering distribution yields exceeding 5%.
What’s more, these REITs are also well-positioned to raise their distribution per unit (DPU) in the coming quarters.
Mapletree Logistics Trust (SGX: M44U)
Mapletree Logistics Trust, or MLT, is a logistics REIT with a portfolio of 185 properties across eight countries.
The REIT has assets under management (AUM) of S$12.8 billion as of 31 March 2023.
For its fiscal 2023 (FY2023) ending 31 March, MLT saw gross revenue rise 7.7% year on year to S$730.6 million.
Its net property income (NPI) improved by 7.2% year on year to S$634.8 million.
The DPU inched up 2.5% year on year to S$0.09011 for FY2023.
The REIT’s units provide a historical distribution yield of 5.3%.
MLT enjoyed a very high portfolio occupancy rate of 97% and also saw a positive rental reversion of 3.1% for the quarter.
The REIT manager has also been very active in capital recycling.
It has announced a proposed acquisition of eight logistics assets in Japan, Australia, and South Korea for S$904.4 million along with a potential acquisition of two more logistics assets in China for S$209.6 million.
It also divested a property in Hong Kong for S$100.3 million and is proposing to sell two properties in Malaysia for S$15.3 million.
Mapletree Industrial Trust (SGX: ME8U)
Mapletree Industrial Trust, or MIT, has a portfolio of 85 properties in Singapore and 56 in the US with an AUM of S$8.8 billion as of 31 March 2023.
Like MLT, MIT has also released its FY2023 earnings but it was a mixed result.
Gross revenue increased by 12.3% year on year to S$684.9 million with NPI climbing 9.7% year on year to S$518 million.
However, the REIT’s DPU slid by 1.7% year on year to S$0.1357.
MIT’s units yielded 6% at the last closing price of S$2.25.
The manager has admitted to grappling with a combination of higher operating expenses and a jump in finance costs as the REIT’s cost of debt increased from 3.3% as of 31 December 2022 to 3.5% for FY2023.
However, there are good reasons to believe that the REIT can increase its DPU.
MIT had just completed the redevelopment of the Kolam Ayer Cluster, now renamed Mapletree Hi-Tech Park @ Kallang Way.
As of FY2023, it had secured a committed occupancy of 44.1% by net lettable area and income from these leases will flow into the REIT for FY2024.
The manager also announced the REIT’s first acquisition in two years, that of a data centre in Osaka, Japan, for S$500.1 million.
AIMS APAC REIT (SGX: O5RU)
AIMS APAC REIT, or AAREIT, has a portfolio comprising 29 properties, of which 26 are located in Singapore and three in Australia.
As of 31 March 2023, these assets had a total value of around S$2.3 billion.
AAREIT reported an encouraging set of earnings for FY2023 as gross revenue jumped 17.6% year on year to S$167.4 million.
NPI rose 18.7% year on year to S$122.5 million while DPU edged up 5.1% year on year to S$0.09944.
The industrial REIT’s units provide a trailing distribution yield of 8.2%.
AAREIT’s portfolio enjoyed a high occupancy of 98% and saw a positive rental reversion of 18.5% for FY2023 after chalking up rental reversion of +7.4% for FY2022.
The manager had also completed a S$1.6 million asset enhancement initiative (AEI) at 23 Tai Seng Drive which saw net lettable area increase by 32%.
The REIT just announced an equity fundraising exercise to raise approximately S$100 million which will be used to fund AEIs, redevelopments, or acquisitions as well as pay down debt.
Frasers Logistics & Commercial Trust (SGX: BUOU)
Frasers Logistics & Commercial Trust, or FLCT, owns 107 industrial and commercial properties across five countries with an AUM of around S$6.8 billion as of 31 March 2023.
For its fiscal 2023’s first half (1H FY2023) ending 31 March 2023, FLCT saw revenue and NPI fall by 11.7% and 13.4% year on year, respectively, to S$208 million and S$155.9 million.
DPU also declined by 8.6% year on year to S$0.0352.
The annualised DPU came up to S$0.0704, giving FLCT’s units a forward distribution yield of 5.5%.
The REIT had a low aggregate leverage of 27.8% and also a low cost of debt of just 1.8%, giving it a debt headroom of S$3.1 billion for accretive acquisitions.
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Disclosure: Royston Yang owns shares of Mapletree Industrial Trust and Frasers Logistics & Commercial Trust.
