4 Singapore REITs with Headroom to Grow Their DPU
REITs are well-known for their reliable distributions as they need to pay out at least 90% of their net profit to qualify for tax incentives.
The Singapore stock exchange is a veritable hub for REITs that will leave you spoilt for choice.
It’s important to pick REITs with strong sponsors and sturdy track records of raising their distribution per unit (DPU).
Another aspect to look out for is REITs with low or fair levels of gearing.
As REITs are leveraged vehicles, they typically tap on debt for acquisitions that can help boost their DPU.
By identifying REITs with reasonable gearing, it’s possible to sieve out those with a good chance of acquiring to improve their DPU.
Here are five Singapore REITs with sufficient debt headroom that you may want to add to your buy watchlist.
Digital Core REIT (SGX: DCRU)
Digital Core REIT, or DCR, is a data centre REIT that owns 10 data centres in the US and Canada worth US$1.46 billion as of 30 June 2022.
The portfolio enjoys full occupancy and its data centre demand is growing with increased cloud demand.
DCR has aggregate leverage of 25.7% as of 30 June 2022, giving it debt headroom of around US$194 million to reach the 35% level.
The REIT recently declared its maiden DPU of US$0.0237 for the period from its IPO on 6 December 2021 to the end of 2022’s first half (1H2022).
DCR has identified acquisition targets in the cities of Frankfurt, Chicago and Dallas.
If purchased, the data centre(s) will help to diversify the portfolio and also increase DPU for unitholders.
Sasseur REIT (SGX: CRPU)
Next up, we have Sasseur REIT with a gearing level of 26.5% as of 30 June 2022.
The Chinese retail REIT owns four outlet malls with a total portfolio valuation of S$1.8 billion.
The REIT is sponsored by Sasseur Group, a leading operator in China’s outlet mall industry with more than eight million VIP members across its stores.
Sasseur REIT has sizable debt headroom of S$904.7 million before it hits the regulatory debt limit of 50% for REITs.
Sasseur Group manages another 10 outlets that could be injected into the REIT with an additional five upcoming outlets to be opened.
Frasers Logistics & Commercial Trust (SGX: BUOU)
Frasers Logistics & Commercial Trust, or FLCT, owns a diversified portfolio of 105 properties worth S$6.5 billion as of 30 June 2022.
The occupancy rate remains high at 96.5% and the properties are spread across five countries – Singapore, Australia, the UK, Germany and the Netherlands.
FLCT’s aggregate leverage stood at 29.2% with debt headroom of S$2.88 billion before hitting the 50% threshold.
The REIT also has a strong sponsor in real estate giant Frasers Property Limited (SGX: TQ5).
FLCT has a good track record of savvy acquisitions, with over S$5 billion worth of purchases since its IPO in June 2016.
For its 1H2022 results ending 31 March 2022, DPU inched up 1.3% year on year to S$0.0385.
iREIT Global (SGX: UD1U)
iREIT Global’s portfolio comprises five freehold office properties in Germany, five in Spain and 27 freehold retail properties in France.
The REIT maintains a low gearing level of 30.8% as of 30 June 2022, with all of its borrowings hedged with swaps and interest rate caps.
The effective interest rate is low at 1.8% per annum and the REIT maintains a healthy interest coverage ratio of 7.7 times.
iREIT Global announced a DPU of €0.0141 for 1H2022, down 1.4% year on year, due to the effect of management fees being paid 100% in cash.
Not sure which REIT to put your money in? Use our 7-step REIT checklist to find one that fits into your retirement plan. Checklist is inside our latest FREE report “Singapore REITs Retirement Plan”. Click here to download it now.
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Disclaimer: Royston Yang owns shares of Digital Core REIT and Frasers Logistics & Commercial Trust.
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