Singapore REITs have a great track record of delivering steady dividends to income-seeking investors.
In recent years, the number of REITs has also steadily increased, giving investors a much wider breadth of choices.
The last few years have seen the emergence of a popular property sub-class – data centres.
Data usage and storage were already steadily increasing in the last decade but the pandemic accelerated this trend as it caused an explosion in digitalisation and cloud computing.
The result?
Data has now become the new oil as organisations scramble to roll out new software and platforms to attract an ever-increasing number of customers.
With the strong demand for data centres unlikely to abate anytime soon, investors can consider hopping on to this train to enjoy the rewards.
Here are four Singapore REITs with data centres within their portfolios that look well-positioned to perform in the coming years.
Mapletree Industrial Trust (SGX: ME8U)
Mapletree Industrial Trust, or MIT, is an industrial REIT with a portfolio of 141 properties spread across six property segments.
The REIT’s properties have a tenant base of more than 2,000 tenants and its assets under management (AUM) stood at S$8.8 billion as of 31 March 2023.
Data centres make up around 53.7% of the REIT’s AUM, with the bulk of the data centres being in the US and the remainder in Singapore.
MIT has 56 data centres in the US of which 90.1% are on a triple net lease structure where tenants bear all the operational expenses of running the data centres.
In Singapore, the REIT has four data centres.
The industrial REIT posted a slight 1.7% year-on-year drop in distribution per unit (DPU) to S$0.1357 for its fiscal 2023 (FY2023) ending 31 March 2023.
FY2024 looks promising for the REIT as it recently completed its redevelopment of Mapletree Hi-Tech Park at Kallang Way.
The income from committed leases for this business park should steadily contribute to rental income for the current fiscal year.
MIT also announced its first acquisition in two years – that of a data centre in Osaka, Japan.
Post-acquisition, data centres will comprise 56.3% of the REIT’s expanded AUM.
Digital Core REIT (SGX: DCRU)
Digital Core REIT, or DCR, is a data centre REIT with a portfolio of 11 data centres across the US, Canada, and Germany.
The REIT’s AUM stood at US$1.58 billion as of 31 March 2023.
DCR recently reported that its second-largest tenant had filed for bankruptcy protection but this tenant has been current on all its rental obligations up till May.
The REIT manager is confident that market rents are above what the tenant is paying for and that vacancy rates in the region are low, implying that investors can enjoy positive rental reversion should the space be backfilled by another tenant.
On a positive note, the REIT’s aggregate leverage stood at just 34.4% with nearly three-quarters of its debt on fixed rates.
In addition, DCR also has a reputable sponsor in Digital Realty Trust (NYSE: DLR) with a global right-of-first-refusal given by the latter to the former for assets that fit DCR’s investment mandate.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT owns a portfolio of 23 data centres across nine countries with an AUM of S$3.7 billion as of 31 March 2023.
The REIT’s DPU has demonstrated an unbroken increase since its IPO back in December 2014, rising from S$0.0651 in 2015 to S$0.10214 in 2022.
Keppel DC REIT has continued its track record for the first quarter of 2023 (1Q 2023), with its DPU rising by 3% year on year to S$0.02541.
The data centre REIT has built-in rental escalations based on the inflation rate for more than half the leases within its portfolio.
The REIT’s gross revenue also improved because of the acquisitions of two data centres in Guangdong, China, last year.
The manager intends to seek more acquisition opportunities to grow the portfolio, and with a gearing ratio of 36.8% with a low cost of debt of 2.8%, Keppel DC REIT still has opportunities to use its debt headroom for further acquisitions to boost its DPU.
CapitaLand Ascendas REIT (SGX: A17U)
CapitaLand Ascendas REIT, or CLAR, is an industrial REIT with 229 properties within its portfolio spread out across Europe, the UK, Australia, Singapore, and the US.
Its AUM stood at S$16.7 billion as of 31 March 2023.
Data centres comprise around 8% of CLAR’s AUM.
CLAR’s portfolio enjoys a high occupancy rate of 94.4% with a positive rental reversion of 11.1% for its 1Q 2023 business update.
The REIT had recently completed two acquisitions worth nearly S$300 million in Singapore and divested a property post-1Q 2023.
Just last month, CLAR forked out S$218.2 million to purchase The Shugart, a research and development facility in Singapore.
This transaction should see DPU inching up by 0.7% for the REIT.
CLAR also has ongoing projects totalling around S$617.4 million that should help to steadily lift its DPU over time.
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Disclosure: Royston Yang owns shares of Mapletree Industrial Trust, Keppel DC REIT and Digital Core REIT.
