It’s no secret that the REIT sector took it on the chin last year.
The combination of elevated interest rates along with high inflation led to cost pressures for the majority of REITs, resulting in lower distributable income.
Unsurprisingly, many REITs suffered a fall in their distributions.
However, REITs that have strong sponsors can mitigate these headwinds and tap on their sponsor for a ready pipeline of assets for acquisitions.
These sponsors also have the expertise to carry out asset enhancement initiatives (AEIs) that help the REITs to generate organic rental income growth.
Here are four reliable REITs armed with strong sponsors that could see their distributions heading higher in 2025.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT is a data centre REIT with a portfolio of 25 data centres across 10 countries.
The REIT’s assets under management (AUM) stood at S$5.2 billion as of 30 September 2024.
Keppel DC REIT has a strong sponsor in blue-chip asset manager Keppel Ltd (SGX: BN4).
Keppel Ltd offers a pipeline of more than S$2 billion of potential data centre assets for acquisition.
The REIT reported a resilient set of results for the third quarter of 2024 (3Q 2024).
Gross revenue rose 8.9% year on year to S$76.9 million, bolstered by strong positive rental reversions and escalations across the portfolio.
Net property income dipped by 0.2% year on year to S$64.5 million.
Distribution per unit (DPU) inched up 0.4% year on year to S$0.02501.
Keppel DC REIT recently completed the acquisition of two colocation data centres in Singapore from its sponsor for S$1.38 billion.
The pro-forma DPU uplift is 7% for the first half of 2024 with potential rental uplifts in future as the current contracted rents are 15% to 20% below comparable market colocation rents.
The data centre REIT’s aggregate leverage will fall to 33.3% upon completion of its equity fundraising exercise, giving it more room to utilise debt for future acquisitions.
Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust, or FCT, is a retail REIT with a portfolio of nine suburban retail malls and an office building.
The REIT’s AUM stood at S$7.1 billion as of 30 September 2024.
FCT’s sponsor is Frasers Property Limited (SGX: TQ5), a real estate giant with total assets of approximately S$40.1 billion as of 31 March 2024.
For fiscal 2024 (FY2024) ending 30 September 2024, the REIT’s gross revenue dipped nearly 5% year on year to S$351.7 million.
NPI fell by 4.6% year on year to S$253.4 million while DPU slipped by 0.9% year on year to S$0.12042.
The decline was attributed to the absence of contribution from Changi City Point which was divested in October 2023, along with lower contributions from Tampines 1 due to its AEI works.
Excluding these factors, revenue and NPI would have been 3.5% and 3.4% higher year on year, respectively, for FY2024.
FCT’s Tampines 1 AEI was completed successfully in August 2024 and the mall achieved full occupancy.
The AEI’s return on investment (ROI) exceeded 8% with more than 9,000 square feet of net lettable area created and deployed to prime retail floors.
Next up is the AEI announced for Hougang Mall which will commence in 2Q 2025 and cost S$51 million.
Management is targeting an ROI of around 7% for this AEI.
CapitaLand Integrated Commercial Trust (SGX: C38U)
CapitaLand Integrated Commercial Trust, or CICT, is a retail and commercial REIT with a portfolio of 26 properties – 21 in Singapore, two in Germany, and three in Australia.
CICT’s portfolio value stood at S$24.5 billion as of 31 December 2023.
The REIT is anchored by a strong sponsor in CapitaLand Investment Limited (SGX: 9CI), a real estate investment manager with S$134 billion of assets under management and S$100 billion of funds under management as of 30 June 2024.
CICT reported a robust set of financial and operating metrics for its 3Q 2024 business update.
Gross revenue for the first nine months of 2024 (9M 2024) rose 2% year on year to S$1.2 billion while NPI increased by 5.4% year on year to S$872.1 million.
Portfolio committed occupancy stood at 96.4% for 3Q 2024 and CICT also reported positive rental reversions of 9.2% and 11.7% for its retail and office divisions for 9M 2024, respectively.
CICT is fresh off its acquisition of a 50% stake in ION Orchard Mall from its sponsor which will result in DPU accretive of 0.9% for its first half of 2024 DPU.
The property was acquired at a gross yield of around 7.1%.
CICT is also active in AEIs and capital recycling.
Two ongoing AEIs include one for the IMM Building in Singapore and another for Gallileo in Germany.
CICT also recently divested its stake in 21 Collyer Quay at an exit yield of 3.5%.
Mapletree Industrial Trust (SGX: ME8U)
Mapletree Industrial Trust, or MIT, is an industrial REIT with an AUM of S$8.9 billion as of 30 September 2024.
Its portfolio comprises 56 properties in the US, 83 in Singapore, and one property in Japan.
MIT has a strong sponsor in Mapletree Investments Pte Ltd, a global real estate investor and manager with an AUM of S$77.5 billion as of 31 March 2024.
The REIT reported a respectable set of earnings for the first half of fiscal 2025 (1H FY2025) ending 30 September 2024.
Gross revenue increased by 3.5% year on year to S$356.7 million while NPI improved by nearly 3% year on year to S$267 million.
DPU edged up 1.3% year on year to S$0.068.
MIT completed its acquisition of a freehold property with redevelopment potential in Tokyo for JPY 14.5 billion.
Its portfolio occupancy stood high at 92.9% as of 30 September 2024.
Aggregate leverage was modest at 39.1% with just 5% of loans coming due in FY2025.
The REIT also enjoyed a positive rental reversion of 10.7% for renewal leases across its portfolio.
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Disclosure: Royston Yang owns shares of Keppel DC REIT and Mapletree Industrial Trust.
