Income-seeking investors are in luck when it comes to finding stable and dependable sources of passive income.
Singapore is well-known for being a REIT hub and has, over the last two decades, built up an impressive variety of REITs that investors can choose from.
From shopping malls and industrial buildings to nursing homes and hotels, REIT investors are spoilt for choice.
That said, it pays to be careful when selecting a suitable REIT to invest in.
A high yielding REIT may come with higher risk.
Therefore, Some attributes to watch for include the quality of its properties and a track record of increased distribution per unit (DPU).
Here are four REITs that offer an enticing yield of more than 5% that investors can consider adding to their watchlists, along with their associated risks.
Manulife US REIT (SGX: BTOU)
Manulife US REIT is a pure-play US office REIT with a portfolio that comprises nine prime properties located in five US states.
The portfolio is valued at US$2 billion and has a net lettable area of close to 4.7 million square feet as of 30 June 2021.
For its fiscal 2021 first half (1H2021), gross revenue fell by 7.9% year on year due to higher vacancies and rent reliefs granted to tenants affected by COVID-19.
Net property income (NPI) declined by 9.8% year on year to US$56.1 million while DPU fell by 11.5% year on year to US$0.027.
Annualised DPU stands at US$0.054, offering a distribution yield of 7.4% at the last traded share price of US$0.73.
The occupancy rate remains high at 91.7%, declining just marginally from 92% in the last quarter.
The REIT’s portfolio has a relatively long weighted average lease expiry (WALE) of 5.3 years.
Gearing is fairly high at 42.1% while the weighted average cost of debt stands at close to 3%.
Manulife US REIT believes the hybrid working model will remain relevant moving forward, with close to three-quarters of businesses planning to bring workers back to the office from September.
Lendlease Global Commercial REIT (SGX: JYEU)
Lendlease Global Commercial REIT, or LREIT, invests in properties used for retail and/or office purposes.
The REIT’s portfolio holds a leasehold interest in 313 Somerset, a retail mall at the Somerset MRT, as well as a freehold interest in Sky Complex, three grade-A office buildings in Milan, Italy.
The REIT also owns a stake in Jem, an integrated office and retail development located at Jurong East MRT.
For the fiscal year ended 30 June 2021 (FY2021), LREIT reported a 5.6% year on year rise in gross revenue to S$78.7 million.
NPI inched up by 5.4% year on year to S$56.9 million and DPU jumped by 14.6% year on year to S$0.0468.
At the last traded share price of S$0.89, the REIT’s units offer a trailing 12-month distribution yield of 5.3%.
Occupancy was close to full at 99.8% while WALE by net lettable area stood at 8.8 years.
Gearing, at 32%, remains well below the threshold of 50% set by the central bank, while the cost of debt is also very low at just 0.88% per annum.
LREIT is currently developing a multi-functional event space adjacent to 313 Somerset to offer unique food concepts and entertainment options.
Construction will commence by the end of 2021.
Elite Commercial REIT (SGX: MXNU)
Elite Commercial REIT invests in commercial properties located in the UK.
The REIT’s portfolio is home to 155 predominantly freehold commercial buildings valued at GBP 515.3 million.
The main tenant in most of Elite’s properties is the Department for Work and Pensions (DWP), the UK’s largest public service department in charge of welfare, pensions and child maintenance.
For 1H2021, Elite reported revenue of GBP 15.9 million and NPI of GBP 15.4 million.
DPU stood at GBP 0.0263, and annualised DPU is around GBP 0.0516.
At Elite’s last traded price of GBP 0.67, annualised distribution yield stands at 7.7%.
The REIT enjoys full occupancy and has a WALE of 6.6 years.
Also, all its leases are on a triple-net basis, meaning the tenants are responsible for all repairs and maintenance expenses.
Inflation-linked rent uplift has also been incorporated into these leases every five years.
Just last week, the REIT announced that its wholly-owned subsidiary has been listed on the international stock exchange, paving the way for Elite to qualify as a UK REIT group and granting it corporate tax exemption.
DPU is expected to rise by around 3% because of this qualification to around GBP 0.0271.
iREIT Global (SGX: UD1U)
iREIT Global invests in a portfolio of office, retail and industrial assets in Europe.
Singapore’s first European REIT, which was listed in August 2014, houses five office properties in Germany, four in Spain and 27 retail properties in France, all of which have a freehold tenure.
For 1H2021, iREIT reported a 31.6% year on year jump in gross revenue to EUR 23.6 million.
NPI surged by 23.4% year on year to EUR 19.3 million while DPU improved by 17.3% year on year to S$0.023.
At the last traded price of S$0.64, annualised distribution yield stood at 7.2%.
Aggregate leverage stood at 33.3% as of 30 June 2021 while the cost of debt stood at 1.8% per annum.
iREIT Global recently completed the acquisition of 27 retail properties with Decathlon as the anchor tenant.
The NPI yield for this acquisition is 7.1% and will add 1% to fiscal 2020’s DPU.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.