Investors are waiting with bated breath for the first interest rate cut by the US Federal Reserve since 2020.
As a recap, interest rates were hiked aggressively by the US central bank from 2022 to 2023 to combat surging inflation.
Should interest rates start to decline, the REIT sector should breathe a sigh of relief.
This asset class has taken it on the chin over the past two years as higher finance costs crimped distributable income, resulting in lower year-on-year distributions.
Lower interest rates also mean that REITs can undertake more acquisitions to grow their distributions.
Here are four Singapore REITs that may announce more acquisitions in due course.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT is a data centre REIT with a portfolio of 23 data centres spread across 10 countries.
The REIT’s assets under management (AUM) stood at S$3.9 billion as of 30 June 2024.
Keppel DC REIT has a good track record of acquisitions, with its most recent being the purchase of a data centre in Tokyo, Japan, for S$201 million back in July this year.
This acquisition is the REIT’s maiden foray into Japan and the data centre provides potential positive rental reversion because the current rent was committed in the mid-2010s.
The purchase is also a yield-accretive one that will increase the REIT’s pro-forma distribution per unit (DPU) for 2023 by 1.1% to S$0.09488.
Before this acquisition, Keppel DC REIT had purchased two data centres in Guangdong, China, back in June 2022.
The REIT reported a mixed performance for the first half of 2024 (1H 2024) because of problems with its tenant in these China data centres.
Gross revenue rose 11.9% year on year to S$157.2 million while net property income (NPI) inched up 4.2% year on year to S$132.6 million.
DPU, however, fell by nearly 10% year on year to S$0.04549.
Keppel DC REIT has more than S$2 billion of potential data centres for acquisition from its blue-chip sponsor Keppel Ltd (SGX: BN4).
Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust, or FCT, is a retail REIT with a portfolio of nine suburban retail malls and one office building.
The REIT’s AUM was approximately S$7.1 billion as of 30 June 2024.
FCT has been active in acquisitions from 2022 till the present and with interest rates heading lower, the retail REIT may find more opportunities to purchase stakes in retail malls.
Back in September 2022, FCT acquired an additional 10% stake in Waterway Point Mall in Punggol, raising its stake to 50%.
Then, in January 2023, FCT partnered with its sponsor Frasers Property Limited (SGX: TQ5) to jointly acquire a 50% interest in NEX Mall in Serangoon for S$652.5 million.
FCT ended up with a 25.5% interest in NEX post-acquisition.
Earlier this year in January, FCT topped up its interest in NEX Mall to 50% through the acquisition of an additional 24.5% effective interest in the popular suburban mall.
FCT’s latest business update for the third quarter of fiscal 2024 was also encouraging.
The retail REIT reported a high occupancy rate of 99.7% and also saw its Tampines 1 Mall achieve 100% committed occupancy post-asset enhancement initiative (AEI).
Mapletree Logistics Trust (SGX: M44U)
Mapletree Logistics Trust, or MLT, is a logistics REIT with a portfolio of 188 properties across eight countries as of 30 June 2024.
MLT’s AUM stood at around S$13.4 billion.
The manager of MLT is active in capital recycling and portfolio rejuvenation and has been undertaking selected divestments and choice acquisitions over the last three years.
Back in fiscal 2024 (ending 31 March 2024), a total of S$1.1 billion was spent acquiring 12 modern, grade A assets.
For the first quarter of fiscal 2025, MLT continued this streak by acquiring three logistics properties in Malaysia and Vietnam.
The REIT has been active in acquisitions and should interest rates fall, the manager should find more opportunities to acquire yield-accretive logistics assets.
CapitaLand Integrated Commercial Trust (SGX: C38U)
CapitaLand Integrated Commercial Trust, or CICT, is a retail and commercial REIT with a portfolio of 21 Singapore properties, two German properties, and three Australian properties.
CICT’s AUM stood at S$24.5 billion as of 31 December 2023.
The REIT reported a strong set of financial results for 1H 2024 with gross revenue rising 2.2% year on year to S$792 million.
NPI jumped 5.4% year on year to S$582.4 million while DPU climbed 2.5% year on year to S$0.0543.
Earlier this month, CICT announced the acquisition of a 50% interest in ION Orchard Mall for S$1.85 billion.
This acquisition is projected to increase its 1H 2024 DPU by 0.9% to S$0.0548 and will be partially funded by an equity fundraising exercise involving a private placement and a preferential offering of units.
Before this acquisition, CICT’s last acquisition was way back in March 2022 before interest rates began their steep ascent.
This acquisition involved the purchase of a 70% stake in 70 Robinson Road for S$1.26 billion which was later renamed “CapitaSky”.
With CICT’s financial clout and the presence of a strong sponsor in CapitaLand Investment Limited (SGX: 9CI), the manager of the REIT should be able to find attractive acquisition opportunities should interest rates decline.
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Disclosure: Royston Yang owns shares of Keppel DC REIT.
