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181121_REITs with higher DPU_Seedly

3 REITs That Increased Their Distributions Recently

profileSudhan P

The earnings season is upon us again and a flurry of companies are reporting their financial results. 

Here, let’s look at five real estate investment trusts (REITs) that have raised their distribution per unit (DPU) recently. 

Such REITs could signal to the market that they have a strong business.

And they could be worth researching further to add to your stock portfolio. 

 

REIT #1: Frasers Logistics & Commercial Trust 

Frasers Logistics & Commercial Trust (SGX: BUOU) is a REIT that owns 103 logistics and commercial properties. 

Its assets are located in developed markets of Australia, Germany, Singapore, the United Kingdom (UK) and the Netherlands. 

For the financial year ended 30 September 2021 (FY2021), Frasers Logistics & Commercial Trust’s revenue increased by 41.4% year-on-year to S$469.3 million mainly due to acquisitions. 

During the year, the REIT acquired six freehold properties in Germany, the Netherlands and the UK. 

With that, Frasers Logistics & Commercial Trust’s full-year net property income grew 35.9% to S$366.7 million while its DPU rose 7.9% to 7.68 Singapore cents, up from 7.12 cents a year back. 

The REIT also ended the year with a strong occupancy rate of 96.2% and a weighted average lease expiry (WALE) of 4.8 years. 

Its balance sheet remained stable with a gearing ratio of 33.7%, as of 30 September 2021. 

Frasers Logistics & Commercial Trust updated the market that there wasn’t any material impact to its portfolio to-date due to the COVID-19 pandemic. 

Only the retail segment of its commercial portfolio, which represents just a small proportion of its total portfolio income, was more challenged.

Looking ahead, the logistics and commercial REIT said that it’s “well-positioned to capitalise on strong logistics industry tailwinds and continue to seek further exposure to attractive growth sectors”. 

There will be continued demand for logistics properties to fulfil the warehousing needs of e-commerce players with the pandemic accelerating the online shopping trend

REIT #2: Keppel DC REIT

Keppel DC REIT (SGX: AJBU) is a data centre REIT with a portfolio of 19 data centre assets located in eight countries in Asia Pacific and Europe. 

Source: Keppel DC REIT Earnings Presentation

For Keppel DC REIT’s 2021 third-quarter, its gross revenue and net property income increased year-on-year by 2.5% and 2.3%, respectively. 

DPU rose 4.5% for the latest period to 2.462 Singapore cents. On a nine-month basis, the REIT’s DPU grew 9.7% year-on-year to 7.386 cents. 

Keppel DC REIT ended September 2021 with a strong balance sheet as well. It had a gearing ratio of 35.1% and its interest coverage ratio remained high at around 12x. 

Earlier in the year, Keppel DC REIT’s manager announced that it is expanding its investment mandate to allow the REIT “to explore real estate and assets necessary to support the digital economy”.

Following that announcement, the REIT’s manager said it’s looking to invest in a special purpose vehicle (SPV) that will be established by telco M1 to own and operate M1’s current mobile, fixed and fibre assets. 

Keppel DC REIT’s investment is around S$90 million, which looks manageable given its balance sheet size. 

The REIT’s manager explained the investment’s rationale: 

“The planned investment into quality network assets is in line with Keppel DC REIT’s drive to support the global digital economy. The SPV will own the network assets that underpin M1’s business offerings. We believe this adds to the growth and cashflow stability for Keppel DC REIT. It also allows us to gain a foothold in Singapore’s connectivity landscape, which we can leverage when seeking further opportunities for real estate and assets that support the digital economy.”

But at least 90% of Keppel DC REIT’s assets under management will still be data centres. 

In the latest quarterly presentation, Keppel DC REIT revealed that the investment into M1’s assets will be DPU-accretive and provide a cash flow of S$11 million per year for 15 years. 

Source: Keppel DC REIT Earnings Presentation

To continue on its growth path, the REIT has also expanded its geographical footprint with the acquisition of a data centre in Jiangmen, Guangdong Province, China. 

Guangdong is one of the top data centre locations in the country, with the highest rate of internet and mobile phone usage in Asia Pacific. 

The facility, Guangdong Data Centre, is a seven-storey fully-fitted data centre and is part of the Bluesea Intelligence Valley Mega Data Centre Campus. 

Keppel DC REIT has the right of first refusal (ROFR) to purchase the remaining five data centres to be developed within the campus. 

Furthermore, the REIT is deepening its footprint in the Netherlands with the acquisition of Eindhoven Campus. 

REIT #3: Parkway Life REIT 

Parkway Life REIT (SGX: C2PU) is a healthcare REIT that owns 55 properties located in Singapore, Japan, and Malaysia. 

In Singapore, its properties are Mount Elizabeth Hospital, Gleneagles Hospital, and Parkway East Hospital. 

For the third quarter of 2021, Parkway Life REIT’s gross revenue grew 1.2% year-on-year to S$30.5 million. 

The increase was mainly due to: 

  • Higher rent from Singapore properties, and
  • Revenue contribution from acquisitions of Japanese properties completed in December 2020 and July this year. 

However, loss of income from a divested property in Japan and depreciation of the Japanese Yen partially offset the increase in gross revenue. 

Despite net property income falling by 2.9% to S$27.3 million, Parkway Life REIT managed to increase its DPU for the quarter by 0.8% to 3.56 Singapore cents. 

Source: Parkway Life REIT Earnings Presentation

In terms of future growth, Parkway Life REIT has secured new master lease agreements for its Singapore hospitals from 23 August 2022 to 31 December 2042, with an option to extend for a further 10 years. 

The agreements come with rental step-ups and a rent review formula, giving the REIT sustained organic growth. 

Source: Parkway Life REIT Investor Presentation

With that, the WALE of Parkway Life REIT’s overall portfolio (by gross rent) has increased from 5.4 years to 17.4 years. 

The REIT’s gearing ratio has also improved from 37% to 34.9% due to a valuation uplift for its Singapore hospitals. 

Furthermore, Parkway Life REIT will inject a one-off renewal capital expenditure of S$150 million to renovate and upgrade its Singapore hospitals.s

The REIT said that the renovation will enhance the competitiveness of its Singapore hospitals to ride on the growth potential of Singapore’s healthcare industry. 

Parkway Life REIT will also have a ROFR over Mount Elizabeth Novena Hospital for a period of 10 years, enhancing the REIT’s attractiveness even further.

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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer doesn’t own units in the REITs mentioned. 

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About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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