2024 is shaping up to be a tough year for the REIT sector.
Despite the lowering of interest rates by 0.75 percentage points in the last three months, income investors are fretting over a possible “higher for longer” interest rate regime.
This tough environment has hit many REITs hard as their borrowing costs soared and put pressure on their distributions.
However, amid the pessimism, several REITs managed to eke out an increase in their distribution per unit (DPU).
We feature four Singapore REITs that managed to grow their DPU despite the macroeconomic headwinds.
Parkway Life REIT (SGX: C2PU)
Parkway Life REIT, or PLife REIT, is a healthcare REIT with a portfolio of 64 properties across three countries.
The REIT owns three hospitals in Singapore, 60 nursing homes in Japan, and strata units in a specialist centre in Malaysia.
PLife REIT reported a mixed set of earnings for the first nine months of 2024 (9M 2024).
Gross revenue dipped by 2.2% year on year to S$108.5 million while net property income (NPI) slid 2.1% year on year to S$102.4 million.
The weaker performance was mainly due to the depreciation of the Japanese Yen against the Singapore Dollar.
DPU, however, inched up 2.8% year on year to S$0.113.
PLife REIT continued to maintain a moderate gearing of 37.5% and a very low cost of debt of just 1.36%.
In late October, the healthcare REIT announced the acquisition of 11 nursing homes in France from DomusVi.
The purchase is projected to increase the REIT’s first half of 2024 (1H 2024) DPU by 1.8% to S$0.0768.
This acquisition also helps to open up a third strategic market for PLife REIT to expand into.
Mapletree Industrial Trust (SGX: ME8U)
Mapletree Industrial Trust, or MIT, is an industrial REIT with a portfolio of 56 properties in the US, 83 properties in Singapore, and one in Japan.
As of 30 September 2024, MIT’s assets under management (AUM) stood at S$8.9 billion.
The industrial REIT reported a respectable set of earnings for the first half of fiscal 2025 (1H FY2025) ending 30 September 2024.
Gross revenue rose 3.5% year on year to S$356.7 million while NPI inched up 2.9% year on year to S$267 million.
DPU edged up 1.3% year on year to S$0.068.
Portfolio occupancy improved slightly from 91.9% to 92.9% quarter-on-quarter.
MIT’s aggregate leverage stood at 39.1% with just 5% of its loans coming due in FY2025.
The industrial REIT’s cost of borrowing stood at 3.2% with the interest coverage ratio at 4.7 times.
The tenant retention rate stayed high at 73.2% and the portfolio enjoyed a positive rental reversion rate of 10.7% for renewal leases.
CapitaLand Integrated Commercial Trust (SGX: C38U)
CapitaLand Integrated Commercial Trust, or CICT, is a retail and commercial REIT with a portfolio of 26 properties in Singapore (21), Germany (2), and Australia (3).
CICT’s AUM stood at S$24.5 billion as of 31 December 2023.
For 1H 2024, the REIT pulled off an admirable performance as gross revenue rose 2.2% year on year to S$792 million.
NPI did even better and increased by 5.4% year on year to S$582.4 million.
DPU grew by 2.5% year on year to S$0.0543.
CICT’s latest third quarter of 2024 (3Q 2024) business update continued this trend of good performance.
Gross revenue crept up 1.7% year on year to S$397.9 million while NPI climbed 5.4% year on year to S$289.8 million.
The retail and commercial REIT also sported a high committed portfolio occupancy of 96.4% with slightly more than three-quarters of its borrowings pegged to fixed rates.
For 9M 2024, CICT reported positive rental reversions of 9.2% and 11.7%, respectively, for its retail and office divisions.
CICT has ongoing asset enhancement initiatives (AEIs) at the IMM Building in Singapore and Gallileo in Germany.
IMM Building has achieved 100% committed occupancy for phases I and II while Gallileo’s AEI is slated for completion in 2H 2025.
AIMS APAC REIT (SGX: O5RU)
AIMS APAC REIT, or AAREIT, is an industrial REIT that owns a portfolio of industrial, logistics, and business park properties.
The REIT owns 25 properties in Singapore and three in Australia.
The industrial REIT reported a commendable set of earnings for 1H FY2025 with gross revenue rising by 7.7% year on year to S$93.5 million.
NPI improved by 5.1% year on year to S$67.6 million.
AAREIT’s DPU increased by 0.4% year on year to S$0.0467.
Portfolio occupancy stayed high at 95% and the REIT also recorded a strong positive rental reversion of 16.9%.
The industrial REIT has a low aggregate leverage of 33.4% with a blended funding cost of 4.4%.
Around 74% of its loans are on fixed rates, thus mitigating some of the impact of higher interest rates.
The manager will continue to make selective investments and developments and also partake in active asset management to drive further positive rental reversion.
Two AEIs are underway to help drive organic growth and further increase the REIT’s top line.
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Disclosure: Royston Yang owns shares of Mapletree Industrial Trust.
