3 REITs with Strong Sponsors That Investors Should Consider Buying
When searching for strong attributes pertaining to real estate investment trusts (REITs), one of the important ones that investors should look out for is a strong sponsor. Aside from asset type, industry fundamentals and country exposure, the presence of a strong sponsor can provide support for a REIT during tough times, assist it in raising funds cheaply, and also act as a source of great assets which the REIT can tap on for acquisitions.
Aside from the above benefits, REITs with strong sponsors usually also come with an astute manager appointed by the sponsor. Great managers are proactive in asset management, engaging in the recycling of capital by selling older assets and acquiring new ones, and these activities help to boost distribution per unit (DPU) growth over the years.
Here are three REITs with strong sponsors which investors should seriously consider for their portfolios.
1. Frasers Centrepoint Trust
Frasers Centrepoint Trust (SGX: J69U), or FCT, is a leading developer-sponsored REIT, and its portfolio consists of six suburban retail properties in Singapore with a combined appraised value of S$2.75 billion, as of 31 December 2018. Recently, FCT also acquired a 33.3% interest in Waterway Point, and the REIT also owns a 31.15% stake in Hektar REIT (KLSE: 5121), a retail-focused REIT listed in Malaysia.
FCT’s sponsor is Frasers Property Limited (SGX: TQ5), or FPL. FPL is a property developer that owns, develops and manages a diverse, integrated portfolio of properties, and has total assets worth S$33 billion as of 31 December 2018. FCT recently purchased a stake in Waterway Point, a suburban mall located in Punggol, from its sponsor FPL. This underscores the importance of a strong sponsor with a ready pipeline of assets for injection into its REITs.
2. CapitaLand Commercial Trust
CapitaLand Commercial Trust (SGX: C61U), or CCT, is Singapore’s first and largest commercial REIT and invests in real estate used for commercial purposes. CCT’s value of deposited properties was around S$11.1 billion, as of 1 April 2019, and comprises a portfolio of eight prime commercial properties in Singapore and one property in Frankfurt, Germany.
CCT’s sponsor is CapitaLand Limited (SGX: C31), a real estate giant with a global portfolio worth over S$100 billion as of 31 December 2018. CapitaLand is present across more than 180 cities in over 30 countries, and its size and track record will inspire confidence in the REITs that it sponsors and manages.
3. Keppel DC REIT
Keppel DC REIT (SGX: AJBU) is the first pure-play data centre REIT, and its portfolio consists of 15 high-quality data centres located in key data centre hubs. Its portfolio spans ten cities in eight countries in Asia Pacific and Europe.
The sponsor for Keppel DC REIT is Keppel T&T, which is a unit of Keppel Corporation Limited (SGX: BN4). Keppel Corporation is a conglomerate which has businesses in rig building (for the oil and gas industry), real estate and urban development. It also has an asset management arm called Keppel Capital, which has a 50% stake in Keppel DC REIT’s manager. With Keppel Capital’s expertise in managing different types of assets in key global markets, unitholders can definitely sleep peacefully at night.
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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has recommended shares of Frasers Centrepoint Trust and, CapitaLand Limited and CapitaLand Commercial Trust. Motley Fool Singapore contributor Royston Yang owns shares in Keppel DC REIT.