It’s a tantalising thought — finding an investment that can pay you for life.
REITs are an asset class that can do just that.
With the requirement to pay out at least 90% of their profits as distributions to enjoy tax benefits, REITs qualify as steady and dependable income investments.
However, not all REITs are made equal.
What you need to look for are attractive characteristics that make a REIT a keeper for the long term.
Such attributes include — a strong sponsor, a great track record of rising distribution per unit (DPU), well-located and high-quality properties, and moderate leverage.
Here are four REITs with the above criteria that can confidently pay you distributions for the rest of your life.
Parkway Life REIT (SGX: C2PU)
Parkway Life REIT is a healthcare REIT that owns a portfolio of three hospitals in Singapore and 52 nursing homes in Japan as of 31 December 2021. The REIT also owns strata-titled lots and units in a specialist clinic in Kuala Lumpur, Malaysia.
Parkway Life REIT reported a creditable set of earnings for its fiscal 2021 (FY2021).
Gross revenue dipped by 0.2% year on year to S$120.7 million while net property income (NPI) slid 1.1% year on year.
DPU, however, rose 2.1% year on year to S$0.1408.
The rise in DPU capped an impressive track record for the healthcare REIT in which it reported an unbroken 13-year consecutive core DPU increase.
Looking ahead, Parkway Life REIT’s assets should remain resilient as healthcare is an integral service through good times and bad.
In addition, the REIT recently signed new master lease agreements for its three Singapore hospitals.
These agreements extend the current leases till the end of 2042, with an option to renew for a further 10 years till 2052.
It’s good news for unitholders as the new leases provide greater revenue visibility and certainty for the long term.
Mapletree Industrial Trust (SGX: ME8U)
Mapletree Industrial Trust, or MIT, is an industrial REIT that owns a portfolio of 143 properties comprising 86 in Singapore and 57 in the US.
The REIT has assets under management of S$8.6 billion as of 31 December 2021 and its portfolio consists of data centres, flatted factories, and light industrial buildings.
MIT has a strong sponsor in Mapletree Investments Pte Ltd, a real estate development and investment firm that owns and manages S$66.3 billion of real estate as of 31 March 2021.
The REIT reported a strong set of earnings for its fiscal 2022’s third-quarter (3Q2022).
Gross revenue jumped by 31.3% year on year to S$162.4 million while NPI rose 24.1% year on year to S$122.7 million.
DPU increased by 6.4% year on year due to a larger number of units in issue.
Like Parkway Life REIT, MIT can also boast an unbroken track record of rising DPU stretching back to FY2012.
As of 31 December 2021, the REIT’s aggregate leverage stood at 39.9% while its cost of debt remained low at 2.3%.
CapitaLand Integrated Commercial Trust (SGX: C38U)
CapitaLand Integrated Commercial Trust, or CICT, owns and invests in properties used for both retail and commercial purposes.
As of 25 March 2022, the REIT’s portfolio comprised 20 properties in Singapore, two in Frankfurt, Germany, and two in Sydney, Australia; worth a total of S$22.9 billion.
The REIT has a strong sponsor in CapitaLand Investment Limited (SGX: 9CI), a real estate investment manager with S$122.9 billion of real estate assets under management as of 31 December 2021.
CICT’s DPU staged a recovery from S$0.0869 in FY2020 to S$0.104 in FY2021 after falling from a high of S$0.1197 in FY2019.
The REIT’s portfolio maintained high occupancy for FY2021, with Singapore retail and office occupancies at 96.8% and 90.4%, respectively.
CICT had recently announced the acquisition of a 70% stake in 79 Robinson Road, a Grade A commercial building in Singapore.
This acquisition is set to boost its DPU to S$0.1056 upon completion.
Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust, or FCT, owns a portfolio of nine suburban retail malls and an office building, all located in Singapore.
The REIT has an AUM of around S$6.1 billion as of 30 September 2021.
FCT has a strong sponsor in Frasers Property Limited (SGX: TQ5), a property giant with total assets of around S$39.2 billion as of 31 March 2021.
The retail REIT’s malls enjoyed healthy footfall as they are located near the HDB heartland areas, with tenant sales posting a 6% increase over pre-pandemic levels for December last year.
FCT also reported a more than year on year doubling of gross revenue to S$341.1 million due to the acquisition of AsiaRetail Fund’s portfolio of five malls.
NPI jumped by 122.4% year on year to S$246.6 million while DPU climbed 33.7% year on year to S$0.12085, exceeding the pre-pandemic DPU of S$0.1207 two years ago.
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Disclaimer: Royston Yang owns shares of Mapletree Industrial Trust.