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It’s Acquisition Season: 5 REITs Looking to Increase Their DPU

·4-min read
Dollar Sign with Up Arrow
Dollar Sign with Up Arrow

There is good news you are a REIT investor.

Income-seeking investors prefer REITs for their consistent dividend which acts as a great vehicle to build a passive income stream.

And it would be even better if these REITs increase their distributions over time. 

There are three main methods used by REITs to increase their payouts: acquisitions, rental reversions, and asset enhancement initiatives.

In the current economic climate, acquisitions are favoured because of the combination of ample liquidity available and low interest rates..

Here are five that recently made acquisitions to boost their DPU.

Ascott Residence Trust (SGX: HMN)

Ascott Residence Trust, or ART, is the largest hospitality stapled trust in the Asia-Pacific region with assets under management (AUM) of around S$7.3 billion as of 30 June 2021.

ART’s portfolio comprises 88 properties spread out across 38 cities in 15 countries in Asia, Europe and the US.

The hospitality trust has been grappling with depressed demand for hotels due to air travel curbs and has recently announced the expansion of its investment mandate to include student accommodation assets.

ART has wasted no time in growing its student accommodation portfolio.

The trust recently announced the acquisition of its third student accommodation asset in Texas, US, for US$70 million.

This acquisition is set to boost distribution per staple security (DPS) by around 1.5%, and the REIT’s gearing will remain unchanged at 35.9% after this transaction.

United Hampshire US REIT (SGX: ODBU)

United Hampshire US REIT, or UHREIT, invests in a portfolio of income-producing grocery-anchored and necessity-based retail properties in the US.

As of 30 June 2021, the REIT owns 22 grocery and necessity properties and self-storage facilities with an AUM of around US$587.1 million.

Some of UHREIT’s tenants include major retailers such as Home Depot (NYSE: HD) and Walmart (NYSE: WMT).

Recently, UHREIT announced its maiden acquisition since its IPO in March last year.

The REIT will acquire two grocery-anchored properties in Pennsylvania (Penrose Plaza) and Virginia (Colonial Square) for US$78.25 million.

Both properties have freehold tenure. 

The acquisition will also reduce the REIT’s Top 10 tenant concentration risk from 66.2% of its base rental income to 61%.

This acquisition will boost the fiscal year 2020 (FY2020)’s pro-forma distribution per unit (DPU) by 1.75% to US$0.0489. It will also increase UHREIT’s portfolio value by 13.3% to US$665.4 million.

Keppel DC REIT (SGX: AJBU)

Keppel DC REIT is a data centre-focused REIT that owns a total of 19 data centres across eight countries worth S$3.1 billion as of 30 June 2021.

The REIT has made two acquisitions in the last three months.

The first was its maiden data centre purchase in Guangdong, China, for around S$132 million.

Expected to be DPU-accretive, the expected completion will be in the second half of this year (2H2021).

The second acquisition involves two data centre buildings in the Netherlands, which is expected to be not just DPU-accretive but will also improve portfolio occupancy from 98% to 98.1%.

In addition to these two deals, Keppel DC REIT also struck a deal with telecommunication company M1 to invest in bonds and preference shares.

This transaction is set to boost FY2020’s DPU by 3.8%.

CapitaLand China Trust (SGX: AU8U)

CapitaLand China Trust, or CLCT, owns a portfolio of 11 shopping malls and five business parks, all located in China.

The REIT also recently expanded its investment mandate to own other types of commercial and industrial properties other than retail malls.

Earlier this month, CLCT made its first foray into Chinese logistics properties with the acquisition of four properties worth S$350.7 million.

This transaction is expected to raise FY2020 DPU from S$0.0635 to S$0.0657.

Mapletree Logistics Trust (SGX: M44U)

Mapletree Logistics Trust, or MLT, invests in a portfolio of 163 logistics properties.

The REITs properties span countries such as Singapore, Hong Kong SAR, Japan, Australia, and China, and its AUM as of 30 June 2021 is S$10.7 billion.

Just two days ago, MLT announced the acquisition of a modern logistics facility in South Korea for around S$153.8 million.

The property has a freehold tenure and is 100% occupied.

This acquisition positions the REIT to capture growing demand from South Korea’s e-commerce industry, which is poised to grow at 20% per annum from this year till 2025.

The purchase will be accretive to DPU.

MLT’s gearing will end up at 40.3% assuming the transaction was fully debt-funded.

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Disclaimer: Royston Yang owns shares of Keppel DC REIT.

The post It’s Acquisition Season: 5 REITs Looking to Increase Their DPU appeared first on The Smart Investor.

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