Happy New Year!
2025 promises to be another interesting year for the local stock market after its strong performance last year.
The Straits Times Index (SGX: ^STI) was up 17.1% as of 30 December 2024, making it one of the best performances by the blue-chip index in years.
The REIT sector, however, still faces challenges in the form of elevated interest rates.
Despite this headwind, several REITs are undertaking initiatives to enhance their portfolios and mitigate the drop in distributions.
Here are four interesting Singapore REITs that recently conducted acquisitions and capital recycling activities.
CDL Hospitality Trusts (SGX: J85)
CDL Hospitality Trusts, or CDLHT, is a hospitality trust with total assets under management (AUM) of S$3.3 billion as of 30 September 2024.
Its portfolio consists of 21 properties with a total of 4,924 hotel rooms, 352 build-to-rent apartments, and a retail mall.
CDLHT announced its maiden foray into the purpose-built student accommodation (PBSA) asset class with the acquisition of Benson Yard in Liverpool (UK) and a vacant piece of land adjacent to Benson Yard, for £37.3 million.
Benson Yard is a freehold property opened in February 2023 with 404 beds.
The PBSA will be managed by its existing operator, Fresh Property Group Limited, and will result in a more diversified and balanced income profile for CDLHT.
The piece of vacant land has a planning consent for a 144-key hotel, but the REIT manager will conduct further feasibility studies to determine the land’s best use and returns.
Benson Yard has a longer typical lease term of 44 to 51 weeks which will help enhance income stability.
The property has a net property income (NPI) yield of 5.6% and the acquisition is expected to result in a distribution per stapled security accretion of 1.3%.
As Benson Yard is not fully stabilised, there is potential for upside when this PBSA has garnered more brand awareness.
Stoneweg European REIT (SGX: CWBU)
Stoneweg European REIT, or SEREIT, used to be known as “Cromwell European REIT”.
The REIT’s portfolio comprises properties in the logistics and light industrial sectors and also includes office assets in gateway cities.
SEREIT’s portfolio is valued at €2.2 billion and comprises more than 100 predominantly freehold properties in countries such as Italy, France, Poland, Finland, and Denmark.
Last month, the REIT manager divested two office assets in Italy, one in Venice Mestre and the other in Florence, for €20.9 million.
The properties were disposed off at a 7.7% premium to their latest valuations.
With this sale, SEREIT would have reduced its exposure to the Italian government as a tenant from ~20% at IPO to just 2.2%.
The manager has executed €284.5 million of divestment in non-core assets at a 13.1% premium to their latest valuations.
Elite UK REIT (SGX: MXNU)
Elite UK REIT’s portfolio consists of mostly freehold properties located in town centres, and near amenities and transportation nodes.
As of 30 June 2024, Elite UK REIT’s AUM stood at £415 million.
The REIT reported a solid set of results for the first nine months of 2024 (9M 2024).
Its distribution per unit (DPU) for 9M 2024 increased by 3.9% year on year to £0.0213.
The occupancy rate also increased to 93.9% with the divestment of Sidlaw House and Dundee for £1.3 million.
The REIT also completed the lease renewal for Theatre Buildings with a positive rental reversion of 5.3%.
Elite UK REIT conducted two more divestments post-results.
The first is the divestment of Hilden House for £3,281,500, which represents a 6% premium above its valuation as of 30 June 2024.
The second involved the divestment of St Paul’s House for £1.6 million with the net proceeds to be used for the repayment of debt.
OUE REIT (SGX: TS0U)
OUE REIT invests in hospitality, retail, and office assets and its portfolio consists of six assets in Singapore and one in Shanghai, China.
The REIT’s AUM stood at S$6.3 billion as of 31 December 2023.
The REIT manager entered into an agreement with an unrelated third party to divest its entire 91.2% equity stake in Lippo Plaza for a sale consideration of RMB 1.9 billion.
Lippo Plaza’s estimated NPI yield is 5.7%.
This disposal aligns with the manager’s proactive asset management strategy to help optimise portfolio performance.
Lippo Plaza is considered a non-core asset and contributed just 6.6% of total rental income as of September 2024.
The proposed divestment should be completed by the end of 2024 with the net proceeds amounting to around S$318.2 million.
These proceeds will be used to pare down debt, undertake accretive acquisitions or asset enhancement initiatives, or distributed as capital distributions to unitholders.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
