3 REITs trading near their all-time highs

Real estate investment trusts (REITs) have suffered a beating in March when the market suffered a massive meltdown.

As cuts in distribution per unit (DPU) started to happen, some investors started to doubt the viability of investing in REITs long-term.

But as the Covid-19 outbreak is now largely under control in Singapore, the government is starting to work on a road map to ease the economy into Phase III, which is the final phase of the reopening of our economy.

Along with it, confidence in REITs has also gradually recovered, especially for those who are poised to enjoy the benefits from the much talked-about ‘new normal’.

Below are three REITs who have recovered from the March lows and are currently trading near their all-time highs.

1. Mapletree Industrial Trust

Mapletree Industrial Trust, or MIT, is an industrial REIT that manages 114 properties in Singapore and North America, with total assets under management of $5.9 billion.

MIT’s share price is up over 22 per cent year to date and is trading near its all-time high of $3.34.

The REIT’s US portfolio is primarily focused on data centre properties, which have seen high demand due to the acceleration of digitalisation amidst the Covid-19 pandemic.

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According to research by Broadgroup, enterprise spending on cloud infrastructure will continue to grow at a compounded annual growth rate (CAGR) of 22 per cent over the next five years.

This increased spending should translate to a greater appetite for data centres.

Earlier in June and September, MIT announced plans to further bolster their data centre assets.

The REIT will make acquisitions of a 60 per cent stake in 14 data centres in Mapletree Redwood Data Trust Centre (MRDTC) as well as a data centre and office property in Virginia, together valued at over $415 million.

In MIT’s latest earnings report for the quarter ended June 30, 2020, the REIT highlighted their diverse tenant base.

They have low dependence on any single tenant or trade sector, with no single sector accounting for more than 18 per cent of gross rental income.

This resilience, coupled with the REIT’s data centre acquisitions, should provide investors with confidence in MIT’s prospects.

2. Parkway Life REIT 

Parkway Life REIT is one of Asia’s largest listed healthcare REITs. The REIT’s portfolio includes 53 properties across Singapore, Japan and Malaysia.

Parkway Life’s share price has risen over 21 per cent in the past year and hit a peak of $4.29 in September 2020. It’s now trading at around $4.08.

As a healthcare-focused REIT, Parkway Life has managed to hold steady amidst the turbulence of the pandemic.

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The REIT reported revenue growth of 4.9 per cent year-on-year for the second quarter ended June 30, 2020, during a period where many other REITs saw a fall in revenue due to rental rebates and waivers.

This resilience has allowed Parkway Life to raise its DPU for the same period by 2.5 per cent year-on-year to $0.0336.

The REIT is on track to maintain their record of raising DPU every single year since its IPO in 2007.

Going forward, the REIT will enjoy increased rental income from its properties.

In Singapore, the minimum guaranteed rent (MGR) for hospitals will increase by 1.17 per cent for one year, from Aug 23, 2020 onwards. This figure is pegged to the consumer price index (CPI), where the MGR will increase by a rate of CPI + 1per cent.

The REIT is also focused on acquiring more assets in the healthcare space, with the aim of reducing concentration risk and increasing DPU.

3. Frasers Logistics & Commercial Trust

Frasers Logistics & Commercial Trust, or FLCT, is a logistics and commercial REIT that manages 99 properties worth $6 billion in five major developed markets across the world.

FLCT’s share price is up 4.7 per cent since Oct 21, 2019 and reached a high of $1.47 in September.

FLCT’s strength comes from its well-diversified portfolio of high-quality tenants.

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No single tenant accounts for more than 4.8per cent of FLCT’s portfolio by gross rental income (GRI).

It also counts MNCs such as Alphabet and Bayerische Motoren Werke AG  amongst their tenants.

In its latest business update for the quarter ended June 30, 2020, the REIT reported a high portfolio occupancy of 97.2 per cent, as well as a healthy weighted average lease expiry (WALE) of 5.2 years.

The resilience of FLCT amidst the greatest financial crisis since 2009 has certainly justified the merger between Frasers Logistics & Industrial Trust and Frasers Commercial Trust that was completed earlier in April.

This article was first published in The Smart Investor. Disclosure: Herman Ng does not own shares in any of the companies mentioned.