Here Are 2 REITs Trading Near Their 52-Week Lows

One of the more popular types of investments in Singapore is the real estate investment trust. Right now, there are over 30 REITs in the local stock market that invest across a wide variety of real estate sectors.

Some of the greatest investors around – good examples are John Neff and Walter Schloss – look at lists of stocks that have fallen hard for potential investing ideas. They believe that some beaten-down stocks may be bargains in relation to their actual economic worth.

Nearly once every week, I run a screen to look for companies in Singapore’s market that are near 52-week lows. In most weeks, REITs will appear on my screen.

So, let’s take a closer look at two REITs I’ve chosen at random from a list of REITs that have unit prices near their respective 52-week lows. The duo are: OUE Hospitality Trust (SGX: SK7) and Manulife US Real Estate Investment Trust (SGX: BTOU).

Source: S&P Global Market Intelligence

OUE Hospitality Trust is actually more than just a REIT – it is a stapled trust that consists of a REIT component and a business trust component. It focuses on hospitality-related assets.

Right now, the trust has three properties, namely, Crowne Plaza Changi Airport Hotel, Mandarin Orchard Singapore, and Mandarin Gallery. The first two are hotels while the last is a high-end shopping mall that is physically linked to Mandarin Orchard Singapore.

OUE Hospitality Trust is sponsored by OUE Ltd (SGX: LJ3), a real estate company that develops residential properties, runs hotels and resorts, and has stakes in commercial and retail properties.

In the trust’s latest results (for the quarter ended 30 June 2016), OUE Hospitality Trust saw its income available for distribution decline by a sharp 18%. But, its distribution per stapled security fell even harder – by 39.5% – as a result of a rights issue in April 2016 that expanded its security count.

In its earnings release, OUE Hospitality Trust commented that “the tourism industry continues to face headwinds in the near term” while the “retail scene in Singapore remains challenging.”

The second trust on the list is Manulife US REIT, a very new REIT in Singapore’s market that listed only in May this year. The REIT, as its name suggests, invests primarily in properties in the US. Right now, the REIT has three office buildings in its portfolio that are located in Los Angeles, Atlanta, and Irvine, Orange County.

These properties have a total net lettable area of 1.8 million square feet and an occupancy rate of 96.5% as of 31 December 2015. As the REIT is still very new, there is little historical financial information to work on. But, it’s worth noting that Manulife US REIT currently has an aggregate leverage of 36.8%; for perspective, REITs in Singapore are subjected to a 45% gearing limit.

Foolish summary

Though the REITs mentioned above are trading near their respective 52-week lows, there is no guarantee that their unit prices will not fall further.

What is important is the business performance of the REITs going forward. Some important areas for investors to look at with the REITs before coming to an investment decision include their property profiles, debt profiles, and quality of management.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.