The REIT sector is facing headwinds of late with sky-high inflation along with a surge in interest rates.
Investors are worried that higher operating expenses and finance costs may eat into REITs’ distribution per unit (DPU).
The iEdge S-REIT Index has dipped by 1.2% from the start of this year through June 28.
Despite the weak performance, REITs continue to be dependable sources of dividends that are well-liked by income investors.
There are several REITs, however, that have bucked the trend and posted a positive performance for the first half of 2023 (1H 2023).
We highlight the five best-performing REITs for 1H 2023 that you could wish to include in your buy watchlist.
Keppel DC REIT (SGX: AJBU)
Standing head and shoulders above the pack is Keppel DC REIT, a data centre REIT with a portfolio of 23 data centres across nine countries.
As of 31 March 2023, the REIT’s assets under management (AUM) stood at S$3.7 billion.
Year-to-date, Keppel DC REIT’s units have risen by 20.7%.
The strong performance can be attributed to the REIT’s robust financial and operating metrics.
For the first quarter of 2023 (1Q 2023), gross revenue rose 6.5% year on year to S$70.4 million while net property income (NPI) increased by 6.3% year on year to S$63.9 million.
Distribution per unit (DPU) edged up 3% year on year to S$0.02541, taking annualised DPU to S$0.10164.
The REIT’s forward distribution yield stands at 4.7%.
Keppel DC REIT also maintained a high portfolio occupancy of 98.5% as of 31 March 2023 with a gearing level of 36.8%, leaving the REIT with sufficient debt headroom for yield-accretive acquisitions.
The REIT also has more than S$2 billion of potential data centre assets for acquisition from its sponsor Keppel Corporation Limited (SGX: BN4).
Frasers Logistics & Commercial Trust (SGX: BUOU)
Frasers Logistics & Commercial Trust, or FLCT, owns 107 properties worth around S$6.8 billion across five countries – Singapore, the UK, Australia, Germany, and the Netherlands.
FLCT’s unit price has risen by 7.8% year-to-date.
The REIT released a lacklustre set of earnings for its fiscal 2023’s first half (1H FY2023) ending 31 March.
Revenue fell by 11.7% year on year to S$208 million while DPU declined by 8.6% year on year to S$0.0352.
The annualised DPU came up to S$0.0704, giving FLCT’s units a forward distribution yield of 5.6%.
The REIT enjoyed a high positive rental reversion of 23.2% for 1H FY2023 with high occupancy of 95.9%.
FLCT also boasts a low aggregate leverage of just 27.8%, providing it with a debt headroom of S$3.1 billion before it hits the statutory gearing limit of 50%.
Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust, or FCT, owns 10 retail suburban malls and one office property in Singapore with an AUM of S$6.9 billion as of 31 March 2023.
FCT’s unit price has run up by 5.8% year-to-date.
For 1H FY2023, FCT reported a 6.5% year-on-year improvement in gross revenue to S$187.6 million while NPI rose 5.7% year on year to S$138 million.
DPU, however, remained flat at S$0.0613.
FCT’s portfolio occupancy hit a high of 99.2% with a positive rental reversion of 4.3%.
There could be more upside to come.
The REIT manager had just completed an asset enhancement initiative (AEI) at Tampines 1 Mall that will deliver a return on investment of around 8%.
Back in January, FCT also partnered with sponsor Frasers Property Limited (SGX: TQ5) to acquire a 50% interest in NEX Mall.
CapitaLand Ascott Trust (SGX: HMN)
CapitaLand Ascott Trust, or CLAS, is a hospitality trust that owns 105 properties in 47 cities across 15 countries.
As of 31 December 2022, the trust had an AUM of S$8 billion.
Year-to-date, CLAS’s units have gained 4.9%.
CLAS enjoyed a strong uplift from the upswing in travel demand, booking a 90% year-on-year surge in revenue per available unit (RevPAU) to S$127.
For 1Q 2023, gross profit jumped 59% year on year from better operating performance coupled with contributions from new properties.
The manager is also undertaking several AEIs for this year on four properties in Singapore, London, France, and Germany.
The trust is also rejuvenating the portfolio with new developments in the US and Singapore.
Frasers Hospitality Trust (SGX: ACV)
Frasers Hospitality Trust, or FHT, has a portfolio of 14 assets in Asia, Australia, and Europe with an AUM of S$1.9 billion as of 30 September 2022.
It is the third Frasers REIT to be featured and its unit price has inched up 4.4% year-to-date.
For 1H FY2023, FHT saw its revenue climb 41.1% year on year to S$62.2 million.
NPI increased by 42.9% year on year to S$45.2 million while distribution per stapled security surged by nearly 80% year on year to S$0.012649.
The annualised forward distribution yield for FHT stood at 5.4%.
The trust’s gearing was at 35% with a low cost of borrowing of 2.9%, allowing it room for more debt-funded acquisitions.
Looking ahead, FHT intends to unlock value via opportunistic divestments and to enhance unitholder returns through AEIs.
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Disclosure: Royston Yang owns shares of Keppel DC REIT and Frasers Logistics & Commercial Trust.
