2 REITS That Have Delivered Mixed Performances Recently
It’s earnings season again. Given many real estate investment trusts (REITs) have reported their results at the same time, it would be useful to group them into three categories – good, bad and mixed. In this article, I will look at two REITs that have recently delivered mixed financial results.
Let’s start with Parkway Life REIT (SGX: C2PU), or PLife REIT. As a quick background, it is one of the largest listed healthcare REIT in Asia by asset size. The REIT has ownership over three private hospital properties locally and holds stakes in 46 healthcare-related assets in Japan. It also has strata-titled units/lots in Gleneagles Intan Medical Centre in Malaysia.
For the quarter ended June 2018, gross revenue grew 1.3% to S$ 28.1 million while net property income (NPI) improved by 1.2% to S$26.2 million as compared to the same period last year. Yet, distribution per unit (DPU) declined 3.7% as compared to the same period last year to 3.19 cents. The decline in DPU was due to a one-off distribution of divestment gain last year. Excluding this, DPU would have increased by 3.6%. As of 30 June 2018, the REIT’s gearing stood at 38.1% and its committed occupancy rate stood at 100%.
Yong Yean Chau, chief executive of the REIT’s manager, commented on the latest performance:
“For the first half of 2018, PLife REIT continues to deliver stable results. Recognising the importance of staying well prepared in an environment of continual uncertainties and rising interest rates, we embarked on various key finance initiatives such as the 6-Year JPY 3.5 billion Notes Issue and extension of JPY income hedges, to provide the REIT with greater certainty in dealing with its interest rate and foreign exchange exposures as well as to further optimise its average term to maturity and cost of borrowings. Our consistent disciplined approach coupled with the defensive lease structures of our diversified portfolio have filtered down to strong and sustainable DPU growth from recurring operations for PLife REIT.
With a focus on delivering sustainable, long-term growth for our Unitholders, we continue to pursue strategic opportunities to drive value for PLife REIT.”
The next REIT on the list is Suntec Real Estate Investment Trust (SGX: T82U). As a quick background, Suntec is one of the largest REITs in Singapore and currently has interests in retail malls and offices in Singapore and Australia. Its portfolio includes Suntec City, a one-third interest in One Raffles Quay, a commercial building in Sydney and a 50% stake in Southgate Complex in Melbourne, just to name a few.
For the quarter ended 30 June 2018, gross revenue improved 3.7% to S$90.5 million while NPI grew by 2.2% to S$60.7 million. This was due to better performances at Suntec Singapore and Suntec City Mall, partially offset by lower contribution from Suntec City office.
Even then, the REIT’s DPU fell by 0.8% year-on-year to 2.474 cents. As of 30 June 2018, the REIT’s gearing stood at 35% whilst its committed occupancy rate stood at 99.0% and 98.2%, respectively, for its office and retail properties at end of the quarter.