Singapore REITs Kick Off the Final Earning Season for 2023: 4 REITs to Watch

(RY) Vivocity, Mapletree
(RY) Vivocity, Mapletree

It is time once again for the start of a brand-new earnings season.

This week will see the kick-off for the final quarterly earnings reporting season of 2023.

Investors will carefully scrutinise REITs’ results as the sector has come under pressure of late.

The twin combination of high inflation and surging interest rates resulted in REITs reporting lower distributions.

Some REITs are also reeling from weaker regional exchange rates with the strengthening of the Singapore Dollar.

Here are four REITs to watch for as they navigate this troubling economic landscape.

Keppel DC REIT (SGX: AJBU)

Keppel DC REIT is a data centre REIT with a portfolio of 23 data centres across nine countries.

Its assets under management (AUM) stood at S$3.7 billion as of 30 June 2023.

The REIT is one of the better-performing REITs this year as its unit price rose 16.2% year-to-date (YTD).

The data centre REIT reported a resilient set of earnings for the first half of 2023 (1H 2023).

Gross revenue inched up 3.6% year on year to S$140.5 million while net property income (NPI) increased by 3.3% year on year to S$127.4 million.

Distribution per unit (DPU) stayed flat year on year at S$0.05051.

Investors will be curious to see if the REIT can continue to report a robust set of results as distributable income comes under pressure from higher interest rates.

The REIT enjoyed an uplift from the acquisitions of two data centres in Guangdong, China, last year.

Renewals and income escalations also helped to contribute to better revenue.

Portfolio occupancy stood high at 98.5% with a long portfolio weighted average lease expiry (WALE) of eight years.

Data centre demand remains robust, driven by hyperscale expansion and the surge in use cases for generative artificial intelligence.

Keppel DC REIT’s aggregate leverage stood at just 36.3%, opening opportunities for the REIT to rely on debt financing for accretive acquisitions.

The manager is committed to the disciplined pursuit of more data centre acquisition opportunities to boost its asset base and DPU.

Keppel Pacific Oak US REIT (SGX: CMOU)

Keppel Pacific Oak US REIT, or KORE, invests in a portfolio of commercial real estate assets in the US.

As of 31 December 2022, the REIT’s portfolio consisted of 13 freehold office buildings and business campuses across eight markets with an AUM of US$1.4 billion.

For 1H 2023, KORE reported a mixed result.

Gross revenue edged up 2.4% year on year to US$75.9 million while NPI improved by 2% year on year to US$43.9 million.

DPU, however, fell by 17.2% year on year to US$0.025 because of higher financing costs and divestments made in 2H 2022.

Investors will be interested to find out the latest on the state of the US commercial market as peer Manulife US REIT (SGX: BTOU) recently breached one of its debt covenants because of a fall in property valuations.

KORE maintains that its portfolio valuation needs to fall by 24% for the REIT to hit the 50% leverage limit.

Meanwhile, its portfolio enjoyed a 90.8% committed occupancy as of 30 June 2023 and it has leases with a 2.5% built-in average annual rental escalation across the portfolio.

Mapletree Pan Asia Commercial Trust (SGX: N2IU)

Mapletree Pan Asia Commercial Trust, or MPACT, has a portfolio of 18 commercial properties across Singapore, Hong Kong, China, Japan, and South Korea.

These properties were valued at S$16.6 billion as of 31 March 2023.

For its latest quarter ending 30 June 2023 (1Q FY2024), MPACT saw gross revenue surge 75.6% year on year to S$237.1 million.

NPI also leapt 68% year on year to S$179.2 million but DPU declined by 12.8% year on year to S$0.0218.

A combination of higher finance costs, increased utility costs and weaker regional exchange rates were to blame for the DPU drop.

Investors will be curious to know if the REIT’s Chinese properties can record an uptick in performance as the China and Hong Kong properties both recorded negative rental reversions for 1Q FY2024.

Elsewhere, MPACT’s key retail asset, VivoCity, also completed its asset enhancement initiative (AEI) in May and the upcoming results will see a full quarter’s contribution from the nearly 80,000 square feet of space reconfiguration.

CapitaLand Integrated Commercial Trust (SGX: C38U)

CapitaLand Integrated Commercial Trust, or CICT, is a retail cum commercial REIT with a portfolio of 21 properties in Singapore, two in Germany, and three in Australia.

Its AUM stood at S$24.2 billion as of 31 December 2022.

CICT reported an impressive set of results for 1H 2023 where its DPU rose 1.5% year on year to S$0.053.

Investors will be looking out for the REIT’s retail portfolio as the REIT had projected for rent and occupancy to continue its positive trajectory for 2023.

For 1H 2023, CICT’s retail portfolio saw a positive rental reversion of 6.9% with shopper traffic and tenant sales up 17.5% and 6% year-on-year, respectively.

All eyes will also be on the REIT’s office performance as it maintained a high overall office occupancy rate of 95.4% as of 30 June 2023.

With a gearing of 40.4% and an average cost of debt of 3.2%, investors will also be closely watching the REIT’s finance costs to see if they may eat into distributable income.

Finally, CICT may also provide updates on its existing AEI at CQ @ Clarke Quay along with plans for any upcoming AEIs or acquisitions.

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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Disclosure: Royston Yang owns shares of Keppel DC REIT.

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