Good times are rolling in once again for REITs.
With borders reopening and economies chugging back to life, 2022 looks set to be a good year for the sector.
And as the good news flows in, income-seeking investors should also rejoice.
Many REITs are prepared to pay out higher levels of distribution per unit (DPU) as occupancy rates firm up and tenants require less assistance.
Other reasons for higher DPU include acquisitions and asset enhancement initiatives (AEI).
Here are four REITs that are well-positioned to deliver increased DPU next year.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT is a data centre REIT that owns 19 data centres in eight countries worth S$3.1 billion as of 30 September 2021.
The REIT has reported steady growth in its DPU for the first nine months of 2021 (9M2021), with gross revenue rising 6.7% year on year and DPU improving by 9.7% year on year to S$0.07386.
Looking ahead, Keppel DC REIT is expecting a 3.8% increase in its fiscal 2020 (FY2020) DPU to S$0.9519 with the subscription of bonds and preference shares issued by a unit of M1, a telecommunication company.
This S$89.7 million investment is expected to yield stable cash inflows for the REIT for 15 years and will also bump up its assets under management o S$3.3 billion.
At the same time, the REIT has also concluded the acquisitions of a data centre in the Netherlands and one in China, both of which will be yield-accretive.
With these two corporate developments, Keppel DC REIT looks poised to report higher DPU for 2022.
Mapletree Logistics Trust (SGX: M44U)
Mapletree Logistics Trust, or MLT, owns a portfolio of 163 logistics properties across seven countries worth around S$10.8 billion as of 30 September 2021.
The REIT has a great track record of raising DPU over the years, and 2022 looks to be no exception.
MLT is focused on acquisition-led growth and has just announced a S$1.4 billion acquisition of Grade A logistics assets in China, Vietnam, and Japan.
The purchase of these 17 properties will boost the REIT’s assets under management (AUM) by 13.5% to S$12.2 billion while increasing its tenant base by nearly 10% to 827.
Aggregate leverage will remain unchanged at 39% while net asset value per unit will rise by 4.4% to S$1.38.
DPU for the fiscal year ended 31 March 2021 (FY2021) is projected to rise by 2.2% to S$0.08511.
The REIT continues to selectively acquire properties to boost its DPU, such as the recent exercising of the option to purchase a logistics property in Singapore for S$24.5 million.
Digital Core REIT (SGX: DCRU)
Digital Core REIT, or DCR, is a recently-listed data centre REIT that owns a portfolio of 10 data centres with an appraised value of US$1.4 billion.
The properties are all freehold and are fully occupied.
Demand for data centres will be driven by continued investments in cloud computing, e-commerce, and social media.
The rate of digitalisation has accelerated by seven years from prior forecasts due to the onset of the pandemic.
DCR’s leases have built-in rental escalation clauses that can deliver organic growth for the REIT.
As such, DPU is projected to increase by 5.3% from US$0.0418 to US$0.044 in the fiscal year 2023.
In addition, the REIT was also listed with a low gearing of 27%, allowing it debt headroom of US$424 million before it hits the 45% gearing level.
With a low cost of debt of just 1.1%, the REIT is well-positioned to take on debt for yield-accretive acquisitions next year.
CapitaLand Integrated Commercial Trust (SGX: C38U)
CapitaLand Integrated Commercial Trust, or CICT, is a commercial and retail REIT with a portfolio of 22 properties in Singapore and two in Frankfurt, Germany.
The AUM for the REIT was S$22.3 billion as of 31 December 2020.
CICT has undertaken several methods to increase its DPU to deliver better unitholder value.
It recently announced the acquisition of two Grade A office buildings in Sydney, Australia, for S$330.7 million.
CICT’s first foray into Australia should see it further diversifying its geographic exposure while also bumping up annualised DPU for 1H2021 by 3.1% to S$0.1054.
Meanwhile, the REIT’s AEI of Six Battery Road is also slated for completion at end-2021, which added a new banking hall and introduced new retailers to the tenant mix.
On the development front, CapitaSpring, a mixed use development in Singapore’s CBD, is on track for full completion also by end-2021 and should start contributing to rental income for the REIT in 2022.
CICT’s 45% interest in the CapitaSpring development is estimated to be worth S$819 million
Get Smart: REITs with rising DPU
The four examples above are just a sample of REITs that are poised to increase their payouts.
At the Smart Dividend Portfolio, we have curated a list of nine REITs that we believe, as a group, can continue to deliver rising DPU over the long term.
If you are interested in building a growing stream of passive income, we invite you to try to build your own dividend-generating REIT portfolio.
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Disclaimer: Royston Yang owns shares of Keppel DC REIT and Digital Core REIT.