Yahoo Finance 4 REITs That Have Announced Distribution Reinvestment Plans: Should You Take Them Up?
The REIT sector saw its fair share of challenges last year as high inflation and soaring interest rates dampened sentiment for the asset class.
Unfortunately, these headwinds have not abated this year.
Many REITs are, therefore, trying to conserve cash as their operating and finance expenses surge.
One cash conservation method employed by REITs is the dividend reinvestment plan or DRIP.
Instead of cash, unitholders can opt to receive their distributions in the form of new units issued by the REIT.
These units are called scrip and allow unitholders to reinvest their dividends and avoid incurring brokerage fees by buying units from the open market.
Some REITs also offer a slight discount to the market price to entice unitholders to select the scrip option.
We profile four REITs that announced DRIPs and assess if investors should take up the offers.
Prime US REIT (SGX: OXMU)
Prime US REIT is a US office REIT with a portfolio of 14 freehold office properties in 13 US markets.
Its assets under management (AUM) stood at US$1.5 billion as of 31 December 2022.
The REIT released its fiscal 2022 earnings recently.
Gross revenue inched up 4% year on year to US$163 million, with contributions from new acquisitions Sorrento Towers and One Tower Center.
However, net property income (NPI) dipped 2.7% year on year to US$97.9 million.
Distribution per unit (DPU) slid 3.4% year on year to US$0.0655.
For the second half of 2022 (2H2022), Prime US REIT declared a DPU of US$0.0303, down 12.2% year on year.
The REIT manager has announced the application of the DRIP to the 2H2022 DPU.
The REIT’s occupancy rate remained steady at around 89% and the REIT enjoyed its 11th consecutive quarter of positive rental reversion.
Aggregate leverage stood at 42.1% with an all-in average interest rate of 3.3%.
The previous DPU of US$0.0352 per unit saw DRIP units being issued at a 2.5% discount to the volume-weighted average price (VWAP).
Mapletree Industrial Trust (SGX: ME8U)
Mapletree Industrial Trust, or MIT, is an industrial REIT with 85 properties in Singapore and 56 in the US.
Total AUM stood at S$8.8 billion as of 31 December 2022.
MIT saw its revenue rise 5% year on year for the third quarter of fiscal 2023 (3Q FY2023) to S$170.4 million.
NPI rose in tandem to S$128.8 million, but DPU ticked down 2.9% year on year to S$0.0339.
The manager has announced that the DRIP will apply to the 3Q FY2023 DPU but will be suspended thereafter.
The issue price for the new units is S$2.3255 per unit, at around a 1% discount to the VWAP.
MIT’s portfolio occupancy stood high at 95.7%.
Gearing came in at 37.2% with a cost of debt of 3.3%. The REIT also has close to three-quarters of its loans on fixed rates.
Lendlease Global Commercial REIT (SGX: JYEU)
Lendlease Global Commercial REIT, or LREIT, is an office cum retail REIT that owns Jem, 313 Somerset, both in Singapore, and an interest in Sky Complex in Milan, Italy.
These properties have an AUM of S$3.6 billion as of 30 June 2022.
LREIT reported a decent set of earnings for its fiscal 2023’s first half (1H FY2023).
Gross revenue more than doubled year on year to S$101.7 million as Jem was added to the REIT’s portfolio.
NPI surged 157.8% year on year to S$76.4 million while DPU inched up 2.1% year on year to S$0.0245.
The REIT’s gearing ratio stood at 39.2% with a low weighted average cost of debt of 2.35%.
Committed occupancy was very high at 99.8%.
The DRIP will apply to the 1H FY2023 DPU and the issue price of new units will be set at around 2% lower than the units’ VWAP.
Starhill Global REIT (SGX: P40U)
Starhill Global REIT, or SGREIT, owns a portfolio of 10 retail and office properties in Singapore, Australia, Malaysia, Japan, and China.
The portfolio was valued at S$2.9 billion as of 31 December 2022.
SGREIT’s 1H FY2023 saw revenue rise 4.1% year on year to S$94.7 million.
NPI increased by 6.7% year on year to S$74.3 million while DPU edged up 2.2% year on year to S$0.0182.
The REIT’s occupancy stayed high at 97.1% with its portfolio boasting a long weighted average lease expiry of 6.8 years by net lettable area.
SGREIT’s gearing stood at just 36.3%, opening the REIT up for debt-fuelled acquisitions.
Around 84% of its loans are on fixed rates and its cost of debt came in at 3.28%.
The REIT manager has confirmed that the DRIP will apply to the 1H FY2023 DPU and that new units will be issued at a 2% discount to the VWAP.
After books closure, management announced that the DRIP issue price is S$0.5661 per unit.
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Disclosure: Royston Yang owns shares of Mapletree Industrial Trust.
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