2 Top-Performing REITs That Have Been Added To Key Indices
Globally, real estate investment trusts (REITs) have performed well this year. The low-interest-rate environment and uncertainty surrounding geopolitical events have seen investors flock to the safe havens of REITs. It is, therefore, no surprise to see that two of the three best-performing constituents of the FTSE ST Mid Cap Index over the first eight months of 2019 were REITs. The two REITs were also rewarded with inclusion into key indices that will increase their profile to investors.
Mapletree Commercial Trust (SGX: N2IU) will replace Hutchison Port Hldg Trust (SGX: NS8U) in the Straits Times Index (SGX: ^STI), while Frasers Centrepoint Trust (SGX: J69U) will become part of the FTSE EPRA/NAREIT Global Real Estate Index Series.
Here are some things to note about the Mapletree Commercial Trust and Frasers Centrepoint Trust.
Mapletree Commercial Trust has been one of the most consistent REITs in terms of growing its distribution per unit (DPU). Its DPU has grown from 6.48 Singapore cents in the year ended March 2013 to 9.14 Singapore cents in the year ended March 2019. Consequently, it’s unit price has appreciated 53% in the last five years.
The owner of VivoCity also began its new financial year with a bang as it reported a 3.5% increase in DPU year-on-year in the most recent quarter.
Investors will be pleased to note that Mapletree Commercial Trust looks primed for more growth in the coming 12 months.
In July, it opened its newest anchor tenant, FairPrice Xtra, in VivoCity. The supermarket occupies a staggering 91.000 square feet, making it the largest and most advanced FairPrice Xtra hypermarket and Unity pharmacy. The mall’s renovation works at Vivo Basement 1 is also almost complete with new tenants starting operations since May 2019.
These new leases are likely to boost the REIT’s rental income in the coming quarters. Mapletree Commercial Trust also has a relatively low gearing of 33.1%, which is well below the 45% regulatory ceiling. The low gearing will provide it with the debt headroom to make yield-accretive acquisitions should an opportunity unfold.
Its inclusion into the Straits Times Index will increase its profile among local investors and there will likely be an inflow of funds into the REIT through funds that track the Straits Times Index. Mapletree Commercial Trust will join the Straits Times Index on 20 September after market close.
A retail gem
Frasers Centrepoint Trust invests primarily in suburban retail malls in Singapore. It also has a 31.15% stake in Hektar Real Estate Investment Trust (KLSE:5121) and a 17.1% stake in PGIM Real Estate AsiaRetail Fund, which gives it exposure to other geographical markets.
Like Mapletree Commercial Trust, Frasers Centrepoint Trust has a solid history of rewarding unitholders with growing DPU.
Its DPU has grown from 6.55 Singapore cents in the year ended September 2007 to 12.015 Singapore cents in the year ended September 2018. That translates to a healthy annualised growth of 5.7%.
In the last five years, the retail trust’s share price rose 36% to S$2.70.
In July, Frasers Centrepoint completed the acquisition of a one-third interest in Waterway Point (it also bought an additional 6.66% on 9 September), expanding its Singapore portfolio to seven properties. Its balance sheet remains strong with a gearing of 23.5% (before the acquisition of its stake in Waterway Point was completed).
The REIT’s inclusion in the FTSE EPRA/NAREIT Global Real Estate Index Series from 23 September will raise its profile among global investors. Richard Ng, CEO of the Frasers Centrepoint Trust’s manager is optimistic about its inclusion, saying that the addition would enable it to reach out to a larger pool of institutional investors and improve the REIT’s trading liquidity.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended the shares of Mapletree Commercial Trust, Frasers Centrepoint Trust and Hektar REIT.