2022 was a disappointing year for REITs, with the sector being beaten down by increasing interest rates.
While investors are justifiably concerned about the adverse impact of higher borrowing costs on the sector, it is also important not to blow the issue out of proportion.
As long as the REITs within your portfolio are well-capitalised and have strategies to buffer against rising interest rates, you can be confident that they can emerge stronger.
Amid the challenging environment, here are five REITs that have managed to raise their distribution per unit (DPU) for 2022.
Mapletree Industrial Trust (SGX: ME8U)
First on the list is Mapletree Industrial Trust, or MIT.
MIT is an industrial REIT with 85 properties in Singapore and 56 properties in the US.
For the second quarter of fiscal 2023, net property income (NPI) increased by 8.3% year on year, mainly driven by contributions from the acquisition of 29 data centres in the US.
MIT’s trailing 12-month (TTM) DPU stood at S$0.1383, representing an increase of 3.2% from S$0.134 a year ago.
The REIT has established a diversified tenant base of over 2,000 tenants and has achieved a high property occupancy rate of 95.6% in the latest quarter.
MIT had an enviable track record of growing its DPU over the last decade, with an average increase of 5.1% per year.
One thing investors should take note is that the REIT’s weighted average funding cost was at 2.9% in the recent quarter, up from 2.5% in the previous quarter.
Higher finance costs will reduce the amount of distributable income the REIT can give, therefore reducing the REIT’s DPU.
However, MIT has 74.2% of its total loans on fixed interest rates, thus helping to mitigate some of this impact.
Keppel DC REIT (SGX: AJBU)
Another REIT that aims to ride on the continued demand for data centres is Keppel DC REIT.
It is a pure-play data centre REIT that boasts 23 data centre properties across nine countries within its portfolio worth a total of S$3.6 billion.
For 3Q2022, the REIT’s NPI inched up 0.5% year-on-year to S$64.1 million.
Thankfully, its distributable income was bolstered by higher finance income, which includes the coupons received from the REIT’s investment in M1’s bonds and preference shares.
As a result, the REIT declared a DPU of S$0.07634 for the nine months ended 2022 (9M2022), 3.4% higher than the same period last year.
As of 30 September 2022, the REIT has a healthy weighted average lease expiry (WALE) of 8.7 years.
It also has a well-spread debt maturity profile, with the bulk of its loans maturing in 2027 and beyond.
Given the high interest rate environment we are currently in, the longer duration of the majority of its loans should mitigate some of the refinancing risks for the REIT.
Capitaland Ascendas REIT (SGX: A17U)
Capitaland Ascendas REIT, or CLAR, owns a total of 226 properties worth S$16.5 billion as of 30 September 2022.
The oldest industrial REIT’s portfolio spans three segments, namely Business Space & Life Sciences, Logistics, and Industrial & Data Centres segments.
Its investment properties are spread across Singapore, the US, Australia & the UK/Europe.
For the first half of 2022, NPI increased by 7.0% year on year, driven mainly by contributions from the acquisitions of data centres and logistics properties in Europe and USA, respectively.
Consequently, CLAR’s 1H2022 DPU stood at S$0.7873, representing an increase of 2.8% from S$0.7660 in the year ago period.
Thanks to its strong sponsor CapitaLand Investment Limited (SGX: 9CI), CLAR enjoys a low weighted average annualised interest rate of 2.2%.
In addition, 78% of its total debt is hedged to fixed interest rates, which help to buffer against a sharp increase in financing costs.
The REIT has achieved a high property occupancy rate of 94.5% in the latest quarter.
Coupled with an average positive portfolio rent reversion of 5.4% in 3Q2022, CLAR should continue to perform well in the years ahead.
To further boost its DPU, CLAR has embarked on asset enhancement initiatives (AEI) and redevelopment projects worth S$622.4 million.
CapitaLand Integrated Commercial Trust (SGX: C38U)
Next on the list is CapitaLand Integrated Commercial Trust, or CICT.
The retail cum commercial REIT owns retail assets, office assets and integrated developments across Singapore, Germany and Australia.
With the reopening of borders and easing of safe distancing measures, retail sales have recovered to their pre-pandemic levels.
Both shopper traffic and tenant sales saw major year on year improvements for 9M2022, with the former rising by 21.9% and the latter increasing by 21.3%.
In 3Q2022, the REIT reported gross revenue of S$374.1 million, 13.7% higher year on year.
NPI grew by 12.7% year on year to reach S$273.3 million.
This brought CICT’s total NPI for the first nine months of 2022 (9M2022) to S$775 million, which translates into an 8.4% year on year increase.
For 1H2022, the REIT’s DPU grew slightly by 0.8% year on year to reach S$0.0522.
Parkway Life REIT (SGX: C2PU)
Parkway Life REIT is a healthcare REIT that manages a portfolio of three private hospitals in Singapore, 57 nursing homes in Japan, and one medical centre in Malaysia.
Parkway Life REIT is one of the most consistent performers on the SGX, having raised its core DPU every year since its listing in 2007.
The compound annual growth rate (CAGR) stood at 6% over these 14 years.
For 1H2022, Parkway Life REIT continued to grow its DPU.
Gross revenue inched up 1% year on year to S$60.2 million while distributable income increased by 1.5% year on year to S$42.7 million.
On the back of these results, DPU rose 1.6% year on year to S$0.0706.
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Disclosure: Ryan Yap does not own any of the shares mentioned.