The REIT sector has been taking it on the chin this year.
A combination of high inflation and surging interest rates has dented sentiment towards the asset class.
As a result, many REITs are seeing their unit prices shrivel as investors fear that distributions will decline.
Alert investors can, however, scour the bombed-out landscape to look for potential gems.
Some of these REITs could be the baby that has been thrown out with the bathwater.
We highlight four Singapore REITs whose share prices have touched their 52-week lows to determine if they could be potential bargains.
Keppel REIT (SGX: K71U)
Keppel REIT is a commercial REIT with 12 properties in Singapore, Australia, South Korea, and Japan.
Its assets under management (AUM) stood at S$9.2 billion as of 30 June 2023.
Keppel REIT’s unit price has slid 8.7% year-to-date (YTD) and at S$0.84, is just a whisker away from its 52-week low of S$0.83.
For the first half of 2023 (1H 2023), property income rose 4.7% year on year to S$114.9 million.
Net property income (NPI), however, dipped by 0.2% year on year to S$80.8 million.
Distribution per unit (DPU) declined by 2.4% year on year to S$0.029 despite the REIT manager doling out S$10 million as an anniversary distribution.
The reasons for the dip were because of higher property expenses and borrowing costs.
Keppel REIT still boasts a high portfolio occupancy rate of 94.9% as of 30 June 2023 with a long portfolio weighted average lease expiry (WALE) of 5.7 years.
Its aggregate leverage stood at 39.2% with an all-in interest rate of 2.84% on its borrowings.
Slightly more than three-quarters of its loans are pegged to fixed rates.
The REIT also enjoys a diversified tenant base with 443 tenants of which many are blue-chip clients.
ARA US Hospitality Trust (SGX: XZL)
ARA US Hospitality Trust, or ARAHT, is a hospitality trust with a portfolio of 37 select-service hotels with 4,826 rooms across 19 states in the US.
The hospitality trust’s unit price has fallen by 22.9% YTD, coming close to its 52-week low of US$0.26.
Revenue for 1H 2023 rose 5.9% year on year to US$86 million.
NPI increased by 4.3% year on year to US$22 million with distribution per stapled security (DPSS) improving by 5.2% year on year to US$0.01501.
The US lodging market continues to recover from COVID-19, with occupancy for 1H 2023 coming in at 63%, around two percentage points higher than the year before.
The average daily rate improved by 6% year on year to US$154 with revenue per available room increasing by 9% year on year to US$97.
Leisure travel spending is projected to surpass 2019 levels by 2024 and airline travel demand has recovered to pre-COVID volumes this year.
These data points bode well for ARAHT’s future as it signifies a sustained recovery for the trust.
CapitaLand China Trust (SGX: AU8U)
CapitaLand China Trust, or CLCT, is a China-focused REIT with a portfolio of 11 shopping malls, five business park properties, and four logistics park properties.
Total AUM stood at S$5.2 billion as of 30 June 2023.
CLCT’s unit price has declined by 22.3% YTD to close at S$0.87, just slightly higher than its 52-week low of S$0.84.
For 1H 2023, CLCT saw its gross revenue fall by 7.4% year on year to S$184.5 million with NPI falling by the same quantum to S$129.2 million.
The decline was purely due to the depreciation of the RMB against the Singapore dollar.
In RMB terms, revenue would have risen marginally by 0.8% year on year to RMB 663.7 million.
As a result, DPU dropped by 8.8% year on year to S$0.0374.
CLCT’s gearing stood at 40.2% with nearly three-quarters of its loans on fixed rates.
The REIT’s average cost of debt stood at 3.54%.
The manager will continue to focus on its long-term roadmap to enable the portfolio to have a 30% weight in retail, 30% in new economy assets, and the remaining 40% in integrated developments.
Frasers Logistics & Commercial Trust (SGX: BUOU)
Frasers Logistics & Commercial Trust, or FLCT, is a logistics and commercial REIT with 107 properties located in Singapore, the UK, Germany, the Netherlands and Australia.
The portfolio’s value stood at S$6.9 billion as of 30 June 2023.
FLCT’s unit price has declined by 6.9% YTD to end at S$1.08, just shy of its 52-week low of S$1.05.
The REIT reported a downbeat set of earnings for its fiscal 2023 first half (1H FY2023) ending 31 March 2023.
Revenue fell by 11.7% year on year to S$208 million with the absence of contributions from the divested Cross Street Exchange along with weaker foreign currencies against the Singapore Dollar.
As a result, DPU fell by 8.6% year on year to S$0.0352.
For its latest business update as of 30 June 2023, FLCT reported a high portfolio occupancy rate of 96.2%.
The quarter also saw a strong positive rental reversion rate of 21.4% with leases on a long WALE of 4.4 years.
FLCT’s aggregate leverage stood low at just 28.6% with the cost of borrowings at just 2%, giving the REIT ample debt headroom of S$3.1 billion to conduct accretive acquisitions.
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Disclosure: Royston Yang owns shares of Frasers Logistics & Commercial Trust.
