REITs have always been a great source of dividend income as they are required to pay out 90% of their earnings as distributions.
However, it pays to be discerning when you are hunting for a good REIT to invest in.
You need to watch out for key attributes to sift out the strong REITs from the weaker ones.
This is especially important as the COVID-19 pandemic has demonstrated that stronger REITs can weather the storm better than the weaker ones.
One important attribute is the presence of a strong REIT sponsor.
A good sponsor not only provides financial support for the REIT during tough times but also has a ready pipeline of assets to inject into the REIT for long-term growth.
Here are five REITs that are backed by strong sponsors that you can consider adding to your watchlist.
Ascendas REIT (SGX: A17U)
Ascendas REIT is Singapore’s first and largest industrial REIT.
As of 31 December 2020, the REIT’s portfolio consists of 200 properties spread out across Singapore, Australia, the UK and the US.
Ascendas REIT has CapitaLand Limited (SGXL C31), a S$20 billion real estate behemoth, as a sponsor and manager.
For its recent fiscal year 2020 (FY2020) results, the REIT reported a 13.6% year on year rise in gross revenue contributed by newly acquired properties.
Net property income (NPI) rose 9.4% year on year to S$776.2 million but distribution per unit (DPU) declined by 6.1% year on year mainly due to rent rebates given out to tenants to tide over the pandemic.
The REIT recently made its maiden investment in European data centres by purchasing a portfolio of 11 data centres in the UK, Netherlands, France and Switzerland for S$904.6 million.
CapitaLand Integrated Commercial Trust (SGX: C38U)
CapitaLand Integrated Commercial Trust, or CICT, is another REIT under the CapitaLand umbrella.
CICT was formed back in October 2020 following the merger of CapitaLand Mall Trust and CapitaLand Commercial Trust.
The REIT now owns a portfolio comprising 22 properties in Singapore and two in Frankfurt, Germany, and has a mix of both commercial and retail properties.
CICT’s portfolio enjoyed high occupancy of 96.4% as of 31 December 2020 and its valuation also remained stable, hallmarks of a strong REIT.
Moving forward, the REIT intends to target both organic growth and acquisitions to deliver stable distributions to unitholders.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT is a data centre-focused REIT that owns 19 data centres across eight countries.
The REIT’s portfolio was valued at S$3 billion as of 31 December 2020.
Keppel DC REIT’s sponsor is Keppel Corporation Limited (SGX: BN4), a S$10 billion property and oil and gas conglomerate.
The REIT saw strong growth in 2020, with gross revenue surging by 36.3% year on year to S$265.6 million and NPI increasing by 37.7% year on year to S$244.2 million.
DPU rose by 20.5% year on year to S$0.0917.
Keppel DC REIT enjoyed high occupancy of 97.8% as of end-2020 and its aggregate leverage of 36.2% offers room for acquisitive growth.
Data centre demand remains strong with the pandemic accelerating the digital shift. Enterprise spending on cloud infrastructure is expected to grow by 22% per year in the next five years.
Mapletree Industrial Trust (SGX: ME8U)
Mapletree Industrial Trust, or MIT, is an industrial REIT with 84 properties in Singapore and 27 properties in the US as of 31 December 2020.
Total assets under management stood at S$6.6 billion.
MIT’s sponsor is Mapletree Investments Pte Ltd, a unit of Temasek Holdings, one of Singapore’s sovereign wealth funds.
For the third quarter of FY2021, the REIT reported a 20.5% year on year increase in gross revenue to S$123.7 million.
The increase came from contributions from 14 data centres acquired recently.
NPI improved by 20.8% year on year while DPU was 3.8% higher year on year.
In March, MIT completed the acquisition of a data centre cum office in the US for US$207.8 million.
Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust, or FCT, is a retail REIT with 10 retail malls in its portfolio.
These malls are located in heartland areas, with 30% to 40% of the tenants in FCT’s malls provided essential services during the circuit breaker period last year.
The REIT’s sponsor is Frasers Property Ltd (SGX: TQ5), a S$4.9 billion real estate developer that owns, develops and manages a property portfolio worth S$38.7 billion as of 30 September 2020.
Despite the crisis, FCT’s portfolio occupancy remained high at 96.4% as of 31 December 2020.
Tenant sales have almost recovered to pre-pandemic levels, despite shopper traffic is still down by 30% to 40%.
The REIT’s gearing level is 37.7% with a low cost of borrowing at just 2.2%, opening FCT up to growth opportunities through acquisitions.
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Disclaimer: Royston Yang owns shares of Keppel DC REIT.