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These 2 REITs Have Delivered A Weaker Performance In Their Latest Earnings

We’re in the earnings season again!

Many of the real estate investment trusts listed in Singapore’s stock market have released their latest results. Some showed growth, some had mixed numbers, while some delivered a weaker financial performance.

In this article, let’s look at two REITs that belong to the third group:

1. First up is Starhill Global Real Estate Investment Trust (SGX: P40U). The REIT focuses on commercial as well as retail properties and currently has 12 properties in its portfolio across Singapore, Australia, Malaysia, China, and Japan.

Its properties in Singapore are likely to be familiar to many who live in the Garden City: They are Wisma Atria and Ngee Ann City, two malls that are seated along Singapore’s famous shopping belt, Orchard Road.

Starhill Global REIT released its results for the quarter ended 31 December 2016 just last week. Gross revenue had declined by 2.8% year-on-year while net property income fell by 5.4%. Consequently, the REIT’s distribution per unit (DPU) slipped by 4.5% from 1.32 cents a year ago to 1.26 cents.

Starhill Global REIT also ended its reporting quarter with an overall committed occupancy rate of 95.4%. This is a decline from the 98% recorded a year ago.

Regarding the REIT’s outlook, its manager commented that the asset redevelopment plans for Plaza Arcade in Australia and the mall repositioning in China are both progressing according to schedule. In Plaza Arcade, the mall will see its retail floor space expand by 33% while in the China mall, a new tenant will be taking over the building under a new long term fixed lease.

2. The next REIT I have is CapitaLand Retail China Trust(SGX: AU8U), which has a focus on retail malls located in China. The REIT’s portfolio currently comprises of 11 malls spread across a number of different cities in China including major ones such as Shanghai, Beijing, and Chengdu.

Last week, the REIT reported its earnings for the quarter and year ended 31 December 2016.

During the last quarter of 2016, CapitaLand Retail China Trust’s net property income declined by 1.5% year-on-year despite a 0.8% increase in gross revenue. With that, the REIT’s distribution per unit for the quarter came in 8.5% lower compared to the same quarter a year ago.

A large chunk of the REIT’s weaker performance is caused by a weaker RMB/SGD exchange rate. To the point, China’s renminbi had declined by 4.6% against the Singapore dollar for the whole of 2016.

CapitaLand Retail China Trust ended its reporting quarter with an overall portfolio occupancy rate of 95.9%, an increase from the 95.1% seen a year ago. Although shopper traffic at the REIT’s malls dipped by 1.5% for the whole of 2016, its tenants’ monthly average sales had increased by 3.1%.

The REIT also shared some statistics about its operating environment. It said that retail sales in China jumped by 10.4% to RMB33.2 trillion in 2016, while annual urban disposable income and expenditure per capita grew by 5.6% and 5.7%, respectively. CapitaLand Retail China Trust thinks that its portfolio of “family-oriented shopping malls will continue to benefit from China’s growing urban population and rising retail sales.”

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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.