The requirement to pay out at least 90% of their earnings as distributions makes the asset class a suitable one for income-focused investors.
However, not all REITs are made equal.
Investors need to zoom in on REITs with robust characteristics that can help them weather tough times.
One crucial aspect is the presence of a strong sponsor that can support the REIT and grant it a healthy pipeline of potential acquisition opportunities.
The REIT should also be well-positioned to increase its distribution per unit (DPU) over time.
Here are four REITs with the above characteristics that you can consider for your buy watchlist.
Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust, or FCT, is a retail REIT with a portfolio of 10 retail malls and an office building in Singapore with assets under management (AUM) of around S$6.9 billion.
FCT has a strong sponsor in Frasers Property Limited (SGX: TQ5), a real estate developer and manager with total assets of approximately S$40.2 billion as of 30 September 2022.
For its fiscal 2023 first half (1H FY2023) ending 30 March 2023, the retail REIT reported a 6.5% year on year increase in revenue to S$187.6 million.
Net property income (NPI) rose 5.7% year on year to S$138 million while DPU remained flat year on year at S$0.0613.
The REIT reported an encouraging business update for its fiscal 2023 third quarter (3Q FY2023).
Retail portfolio committed occupancy improved by 1.6 percentage points to 98.7%.
Shopper traffic and tenant sales also increased by 16% and 5% year-on-year, respectively, for 3Q FY2023.
FCT also recently announced the divestment of Changi City Point for S$338 million, helping to lower its gearing level to 37.1%.
The lower gearing will offer the retail REIT more borrowing capacity for yield-accretive acquisitions.
Parkway Life REIT (SGX: C2PU)
Parkway Life REIT, or PLife REIT, is a healthcare REIT with a portfolio of 61 properties in Singapore, Malaysia, and Japan with an AUM of around S$2.2 billion as of 31 December 2022.
PLife REIT has a strong sponsor in IHH Healthcare Berhad (SGX: Q0F), an integrated healthcare provider with a presence in 10 countries.
For the first half of 2023 (1H 2023), the healthcare REIT saw gross revenue jump 23.6% year on year to S$74.4 million.
NPI climbed 25.1% year on year to S$70.1 million.
DPU inched up 3.3% year on year to S$0.0729.
There could be more good news to come.
The REIT has renewed its lease for its Singapore hospitals till the end of 2042, giving it rental income certainty.
Moreover, PLife REIT can enjoy organic rental growth with a clear rent structure in place for future escalations.
Mapletree Logistics Trust (SGX: M44U)
Mapletree Logistics Trust, or MLT, is an industrial REIT with a portfolio of 193 properties in eight countries.
MLT has an AUM of approximately S$13.5 billion as of 30 June 2023.
The logistics REIT’s sponsor is Mapletree Investments Pte Ltd, a wholly-owned unit of Temasek Holdings that owns and manages S$77.4 billion of real estate as of 31 March 2023.
MLT continues to post DPU growth despite the tough macroeconomic environment.
For its fiscal 2024 first quarter (1Q FY2024) earnings ending 30 June 2023, the REIT saw gross revenue and NPI dip by 2.9% and 3.1%, respectively, to S$182.2 million and S$158.1 million.
DPU, however, edged up 0.1% year on year to S$0.02271.
MLT enjoyed a high portfolio occupancy of 97.1% and saw a positive rental reversion of 4.2% for its latest quarter.
The REIT had also just completed the acquisition of eight properties in Japan, South Korea, and Australia that should bump up its DPU.
In addition, MLT also has long-term projects that should add value to the portfolio over time, such as the amalgamation of land parcels in Malaysia that will be completed by 2027 and the redevelopment of 51 Benoi Road in Singapore slated for completion by 2025.
CapitaLand Integrated Commercial Trust (SGX: C38U)
CapitaLand Integrated Commercial Trust, or CICT, is a retail and commercial REIT with a total of 26 properties in Singapore (21), Germany (2), and Australia (3).
Its AUM stood at S$24.2 billion as of 31 December 2022.
CICT’s sponsor is CapitaLand Investment Limited (SGX: 9CI), a real estate investment manager with S$133 billion of property AUM and S$89 billion of real estate funds under management as of 31 March 2023.
The REIT reported an impressive set of earnings for 1H 2023.
Revenue and NPI both increased year on year with DPU rising from S$0.0522 to S$0.053.
CICT’s portfolio committed occupancy stood high at 96.7% as of 30 June 2023.
Both its retail and office portfolio also enjoyed positive rental reversions of 6.9% and 9.6%, respectively, for 1H 2023.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.