2 REITs To Watch This Week – Mapletree Commercial Trust And Mapletree Industrial Trust
Earnings seasons has once again begun. This week a host of real estate investment trusts (REITs) will be releasing their earnings update for their latest quarters.
In particular, I will be keeping a close eye on two REITs:
- Mapletree Commercial Trust (SGX: N2IU)
- Mapletree Industrial Trust (SGX: ME8U)
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Here’s what to look out for.
1. Mapletree Industrial Trust
With a portfolio of 101 properties, including a 40% stake in 14 data centres in the United States, Mapletree Industrial Trust (SGX: N2IU) is one of Singapore’s largest industrial real estate investment trusts.
The trust has been a model of consistency in the past with distribution per unit increasing consistently over the past nine years.
In the last reporting quarter ended 31 December 2018, the REIT again delivered impressive results, with distributable income up 9.0% and distribution per unit (DPU) up 6.6% from a year ago.
Mapletree Industrial trust currently has a distribution reinvestment scheme that allows investors to receive their dividends in units instead of cash. This has given it a source of new equity funding that has helped the trust fund development project costs.
On 1 February, Mapletree Industrial Trust completed the acquisition of 18 Tai Seng Street. To fund the acquisition, Mapletree issued a private placement of 103.3 million new units at S$1.945 per unit. This is slightly below the current trading price of S$2.08 per unit.
According to initial pro forma calculations, the acquisition should be DPU-accretive and will also lead to net asset value per unit expansion.
Investors should look out for the DPU impact of the newly completed acquisition and the impact from the larger number of units following the private placement. On top of that, it would also be interesting to find out more about how the acquisition affected the company’s gearing and balance sheet.
2. Mapletree Commercial Trust
Known as the owner of Singapore’s largest shopping centre, VivoCity, Mapletree Commercial Trust (SGX: ME8U) is one of the best-performing REITs in the Singapore market.
Since going public, the REIT’s DPU has increased from around 5.2 Singapore cents in FY2011/2012 to 9.04 in FY2017/2018.
In the last quarter ended 31 December 2018, the trust extended its winning streak of growth as DPU increased by 1.3%. The positive performance looks primed to continue with asset enhancement initiatives in VivoCity increasing the gross leasable area of the property.
In the first nine months of the trust’s financial year 2018/2019, portfolio rental reversion was 5.8%, which should bode well for the rental income over the next couple of years.
In the upcoming earnings update, I will be keeping an eye out for updates on the VivoCity asset enhancement initiatives. The level 3 public library at VivoCity officially opened in January 2019.
It will be interesting to see if the new library does have an impact on shopper traffic at Vivocity. Besides portfolio updates, I am expecting the REIT to deliver marginally higher DPU this quarter, due to the completion of the AEI works and the impact of positive rental reversions signed in the previous three quarters.
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