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4 Top REITs in Singapore in September

Hotel Lobby 5
Hotel Lobby 5

Singapore is famous for being a REIT hub, and investors have a buffet of choices when it comes to picking a REIT for their portfolios.

While REITs are well-known for being dependable dividend payers, the sector has come under pressure in recent months due to a combination of high inflation and rising interest rates.

As a result, unit prices for a wide swath of REITs have come under pressure.

Despite the weak sentiment, we believe that there are REITs that can overcome these troubles and still do well in the long run.

Here are four REITs to watch for this month.

Digital Core REIT (SGX: DCRU)

Digital Core REIT, or DCR, is a pure-play data centre REIT with a portfolio of 10 freehold data centres located in the US and Canada.

The portfolio enjoyed 100% occupancy and had a value of US$1.46 billion as of 30 June 2022.

DCR reported its maiden set of earnings for the first half of fiscal 2022 (1H2022) and declared a distribution per unit of US$0.0206, 1.4% below its forecast.

For the period from DCR’s IPO on 6 December 2021 to 30 June 2022, the total DPU came up to US$0.0237.

The data centre REIT has now proposed to acquire a 25% stake in a data centre in Frankfurt, Germany for US$146 million.

DCR has the option to acquire up to 89.9% of this Frankfurt data centre and a 90% interest in a Dallas data centre for US$700 million should it choose to tap on equity fundraising.

Both options are DPU-accretive and will raise 1H2022’s DPU by 2% and 3.1%, respectively.

Aggregate leverage for DCR will rise from the current 25.7% to 33% if it just acquires one data centre, and to 37.5% if it acquires a stake in two of them.

Parkway Life REIT (SGX: C2PU)

Parkway Life REIT, or PLife REIT, is a healthcare REIT with a portfolio of 56 properties worth around S$2.29 billion as of 31 December 2021.

The REIT owns three private hospitals in Singapore, 52 nursing homes in Japan and strata-titled lots and units in a specialist clinic in Malaysia.

The REIT has managed to grow its core DPU admirably over the years and continued to do so for its 1H2022 earnings.

Gross revenue inched up 1% year on year to S$60.2 million while net property income (NPI) crept up 1.1% year on year to S$56 million.

DPU increased by 1.5% year on year to S$0.0706.

PLife REIT announced two acquisitions of nursing homes in Japan this month.

The first acquisition is that of three nursing homes in the Hokkaido region for around S$26.1 million.

These three properties were purchased at an average NPI yield of 6.5%.

The second acquisition is for two nursing homes in Tokyo for S$29.4 million with an NPI yield of 5.2%.

Both acquisitions are expected to be yield-accretive and will enhance PLife REIT’s future DPU.

Daiwa House Logistics Trust (SGX: DHLU)

Daiwa House Logistics Trust, or DHLT, owns a portfolio of 14 modern logistics properties across Japan with assets under management (AUM) of JPY 81.1 billion as of 31 December 2021.

Gross revenue for the REIT for the period from 26 November 2021 to 30 June 2022 (FP2022) was 3.6% lower than forecast at S$38.9 million while NPI was 4.5% lower.

DPU, however, stayed in line with estimates at S$0.0309.

DHLT announced the acquisition of two freehold logistics properties and a piece of freehold land for S$47.7 million.

This maiden purchase will increase the REIT’s NPI for FP2022 by 3.4% and DPU by 1.3% to S$0.0313.

CapitaLand Ascott Trust (SGX: HMN)

Newly named CapitaLand Ascott Trust, or CLAS, is the largest hospitality trust in Asia Pacific. CLAS was previously Ascott Residence Trust.

It owns 95 properties with over 17,000 units in 44 cities across 15 countries, with an AUM of S$7.6 billion as of 30 June 2022.

CLAS used to be known as Ascott Residence Trust but underwent a name change recently.

The trust is enjoying an uplift in fortunes from reopened borders and a resumption of air travel.

Revenue for 1H2022 jumped 45% year on year to S$267.4 million.

Distribution per stapled security (DPSS) rose 14% year on year to S$0.0233.

Last month, CLAS announced the acquisition of nine properties worth S$318.3 million in France, Japan, Vietnam, Australia and the US from its sponsor, CapitaLand Investment Limited (SGX: 9CI).

This transaction is expected to increase CLAS’ AUM to S$8.3 billion and will increase the trust’s DPU by 2.8%.

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Disclaimer: Royston Yang owns shares of Digital Core REIT.

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