Unless you have been living under a rock, you will be well-aware that interest rates have risen by quite a fair bit through a series of aggressive hikes by the US Federal Reserve.

As REITs are required to pay out 90.0% of its earnings as distributions to unitholders (this is the reason why they are so popular among retail investors here, due to its high distribution payout and also for its high yield), when they need to acquire new properties (which is one of the fastest way to grow its financials), or embark on asset enhancement initiatives (which includes works to spruce up its properties to further maximise its returns), they will need to raise funds.

One of the most common fund raising methods is through bank borrowings. However, with interest rates at lofty levels at present (and unfortunately, it will remain as such through the rest of 2023, and at least in the 1st half of 2024), acquisition activities are being stopped in their tracks, as the REITs’ management choose to be more prudent in managing the REIT’s capital. Together with higher borrowing costs on existing borrowings (as a result of the high interest rate environment), distribution payouts to unitholders was negatively impacted, and it is highly likely that its full-year distribution payout this financial year will be lower compared to the previous year.

With a total of 10 REITs in my investment portfolio, are these REITs a hold or a sell? Let me do a quick review of each of the 10 REITs in my investment portfolio (based on its latest quarterly results or business updates released for the quarter ended 30 June 2023):

1. CapitaLand Ascendas REIT (SGX:A17U)

Apart from a slight decline in its distribution payout (by 2.0% to 7.719 cents/unit) due to a larger unit base following the issuance of new units pursuant to a private placement exercise done in May 2023, along with a higher borrowing cost, the other metrics that I focus on continue to remain stable.

Financial performance-wise, its gross revenue for the 1st half of the year saw a mid single-digit percentage improvement (by 7.7%) due to contributions from the newly acquired properties, while portfolio occupancy continues to remain at a very high level of 94.4% as at 30 June 2023.

You can read my full review of the REIT’s 1H FY2023 results here.

2. CapitaLand India Trust (SGX:CY6U)

CapitaLand India Trust was the latest addition to my long-term investment portfolio – where based on my invested price of S$1.02, and a full-year distribution payout of 8.19 cents/unit in FY2022, it represented a distribution yield of about 8.0% – which is a very high one in my opinion.

However, for the first half of FY2023, its distribution payout fell by 21.5% to 3.36 cents/unit, as a result of a higher unit base due to preferential offering exercise in June 2023. Higher borrowing costs also contributed to a decline in its distribution payout.

Apart from that, its gross revenue for 1H FY2023 compared against last year has been stable (where it grew by 7.0%) due to higher portfolio occupancy, along with contributions from newly acquired properties. Portfolio occupancy was also very resilient at 94.0%.

You can read my full review of the REIT’s 1H FY2023 results here.

3. CapitaLand Integrated Commercial Trust (SGX:C38U)

CapitaLand Integrated Commercial Trust’s distribution payout declared for the first half of FY2023 increased slightly to 5.30 cents/unit, which can be attributed to contributions from its acquisitions, and also from the completed asset enhancement works at Raffles City Singapore. If not for higher borrowing costs, its distribution payout would have been higher.

Looking at its financial performance (both for the 2nd quarter, as well as for the first half of the year), gross revenue have seen a double-digit percentage improvement, contributed by the newly acquired properties.

In terms of its portfolio occupancy, its retail, office, and integrated development properties have an occupancy rate of above 90%, which I consider to be very resilient.

You can read my full review of the REIT’s Q2 and 1H FY2023 results here.

4. EC World REIT (SGX:BWCU)

This REIT is currently suspended since 31 August 2023 due to problems relating to its debt repayment.

At the same time, its distribution payout for 1H FY2023 has also been suspended indefinitely, due to the REIT having not enough funds to make the payment, as a result of the Sponsor, which is the REIT’s main revenue contributor, defaulting on its rental obligations. You can read the announcement in full here.

At the time of writing, there are no further updates on these 2 fronts. I will continue to keep a close watch on it and provide any material updates as and when I have them.

5. Frasers Centrepoint Trust (SGX:J69U)

Frasers Centrepoint Trust has a financial year end every 31 September. Hence, for the quarter ended 30 June, it was for the 3rd quarter of FY2022/23. As they have switched to half yearly reporting of its full financial results, only an update about its portfolio occupancy and debt profile was made available.

Its portfolio occupancy was maintained at a very high level of 98.7%.

No distributions were declared this time round as it pays out one on a half-yearly basis.

You can read my full review of the REIT’s Q3 FY2022/23 business update here.

6. Keppel DC REIT (SGX:AJBU)

Apart from CapitaLand Integrated Commercial Trust, Keppel DC REIT was another REIT among the 10 REITs I have investments in that saw its distribution payout recording an improvement compared to last year (even though just slightly), at 5.051 cents/unit.

Financial performance for the 2nd quarter, as well as for the 1st half of FY2023, remained stable (where they record a low single-digit percentage gain, attributed by contributions from the newly acquired data centres in China, along with contract renewals and income escalations), with portfolio occupancy remaining at a high of 98.5%.

You can read my full review of its Q2 and 1H FY2023 results here.

7. Mapletree Industrial Trust (SGX:ME8U)

Mapletree Industrial Trust has a financial year end every 31 March. As such, for the quarter ended 30 June, it was for the 1st quarter of FY2023/24.

Its distribution payout declined slightly by 2.9% to 3.39 cents due to higher property operating expenses, higher borrowing costs, and a larger unit base (as a result of a private placement exercise done in May 2023, as well as distribution reinvestment plan over 5 quarters – from Q3 FY2021/22 to Q3 FY2022/23).

Apart from that, in terms of its financial performance, it has remained stable, where the REIT’s gross revenue edged up by 1.7% compared to last year (which was pretty much within my expectation considering acquisition activities slowed down significantly as a result of the high interest rate environment). Portfolio occupancy remained high at 93.3%.

You can read my full review of the REIT’s Q1 FY2022/23 results here.

8. Mapletree Logistics Trust (SGX:M44U)

Same as Mapletree Industrial Trust, Mapletree Logistics Trust also have a financial year end every 31 March. So, for the results released for the quarter ended 30 June, it was for the 1st quarter of FY2023/24.

Distribution payout for the logistics REITs edged up slightly to 2.271 cents/unit.

In terms of its financial performance, its gross revenue declined by 2.9% mainly due to weaker foreign currencies against the Singapore Dollar (which is something beyond our control). However, in terms of portfolio occupancy as at 30 June 2023, it remains very strong, at 97.1%.

You can read my full review of the REIT’s Q1 FY2022/23 results here.

9. Mapletree Pan Asia Commercial Trust (SGX:N2IU)

Just like the other 2 Mapletree REITs we have looked at, Mapletree Pan Asia Commercial Trust also has a financial year ending every 31 March, so its latest results was for the 1st quarter of FY2023/24.

Distribution payout declined by 12.8% to 2.18 cents/unit as a result of a larger unit base (following the merger with Mapletree North Asia Commercial Trust).

As far as its financial performances are concerned, its gross revenue jumped by 75.6% due to the contribution of the properties from Mapletree North Asia Commercial Trust’s portfolio after the completion of the merger in August 2022. Portfolio occupancy-wise, it is also very resilient at 95.4% as at 30 June 2023.

You can read my full review of the REIT’s Q1 FY2023/24 results here.

10. Suntec REIT (SGX:T82U)

Apart from EC World REIT (which I have talked about earlier), Suntec REIT is another one where I have concerns about its debt profile – where at the time of writing, its gearing level is inching towards the regulatory limit of 45.0% (why 45.0% is because its interest coverage ratio is currently below 2.5x) – I am monitoring it very closely, and sending relevant questions to the management when the need to do so arises to seek clarification, and understand more about the current situation.

Looking beyond its debt profile, both its financial performance, as well as its portfolio occupancy are pretty decent – for the former, it has risen by about 10% both for the 2nd quarter, as well as for the first half of the year, contributed by improvements in Suntec City, Suntec Singapore (which is the convention centre), and The Minster Building (UK); for the latter, it has been maintained at a high of above 95.0% for its retail and office properties in all the geographical locations – Singapore, Australia, as well as in the United Kingdom.

You can read my full review of its Q2 and 1H FY2023 results here.

Closing Thoughts

Apart from the 2 REITs I have investments in (EC World REIT which is suspended at the moment, and Suntec REIT where I have concerns about its high aggregate leverage and low interest coverage ratio), the remaining 8 REITs continue to record a stable performance in terms of their financial numbers, portfolio occupancy, and debt profile.

The only slight negative is that most of the 8 REITs saw their distribution payout declined compared to the year before. Despite of that, I’m confident of their distribution payouts restoring to the previous highs (before the series of aggressive interest rate hikes by the US Federal Reserve) in time to come (when interest rates come down to more reasonable levels), and I will look at the right prices to bring down my average invested prices in them – Just to share, I’ve just brought my average invested price for CapitaLand Integrated Commercial Trust down from S$2.04 previously to S$1.92 currently (where I bought more units at S$1.81 on Tuesday, 03 October.)

Conducting reviews, like the one I did in this post, is very important as a retail investor, as it allows you to be aware of what is happening, which will really help in making better investment decisions.

So, apart from knowing how to choose REITs to invest in, knowing what to do after you have invested in them is equally important – and its something I have covered in detail in my book ‘Building Your REIT-irement Portfolio’ under Chapter 5: Monitoring the ‘Health’ of Your REIT Investment.

It is a book I have written specially for newbie investors where I have documented everything one will need to know to start building an income producing REIT investment portfolio to generate residual income for themselves which they can use to either supplement their active income (i.e., income generated from their full-time job), for their ‘wants’, for re-investment to build an even bigger investment portfolio, or for retirement.

To cater to the needs of everyone, I have made available both the digital version (in PDF format, which you can download immediately after payment), as well as the physical version (which will be mailed out to the address you have specified in the payments page).

You can find out more about the book here.

Disclaimer: At the time of writing, I am a unitholder of all the 10 REITs discussed in this post.

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