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Here Are 2 REITs That Delivered Growth In Their Latest Earnings

We’re at the tail end of the current earnings season.

As is common with every earnings season, there will be some real estate investment trusts (REITs) posting growth, some REITs posting mixed numbers, and some REITs experiencing declines. So, which are the REITs that have recently reported lower numbers? Let’s look at two of them:

1. In late October, Mapletree Industrial Trust (SGX: ME8U) released its second quarter results for its financial year ending 31 March 2018 (FY2018). The reporting period was for 1 July 2017 to 30 September 2017.

As a quick introduction, Mapletree Industrial Trust is a real estate investment trust that focuses on industrial properties. It currently has 85 properties in Singapore that are collectively valued at S$3.78 billion.

During the reporting quarter, the REIT’s gross revenue grew by 9.9% to S$92.6 million while net property income (NPI) improved by 11.1% to S$70.7 million. These led to a 6.6% increase in distribution per unit (DPU) to 3.00 cents.

Mapletree Industrial Trust benefitted from revenue contributions from a build-to-suit project for HP Singapore, and a pre-termination compensation of S$3.1 million from Johnson & Johnson.  In its earnings release, Mapletree Industrial Trust said that “continued supply of competing industrial space and exit of tenants are expected to exert pressure on rental and occupancy rates.” Put another way, investors can expect the competitive operating environment in the industrial property sector to remain.

2. Mapletree Industrial Trust’s corporate cousin, Mapletree Commercial Trust (SGX: N2IU), also reported its fiscal second quarter earnings in late October.

Although its name has the word “Commercial” in it, Mapletree Commercial Trust generates nearly half of its revenue from VivoCity, Singapore’s largest retail mall. The other four assets the REIT has are PSA BuildingBank of America Merrill Lynch HarbourFrontMapletree Anson, and Mapletree Business City I.

Mapletree Commercial Trust posted gross revenue of S$107.2 million in the reporting quarter, up 21.7% year-on-year. NPI improved by an even higher percentage of 23.4% to come in at S$84.4 million. Consequently, the REIT’s DPU grew 9.3% to 2.24 cents for the quarter.

Mapletree Commercial Trust’s positive performance was driven by the accretive acquisition of Mapletree Business City I (the asset was purchased in August 2016) as well growth in VivoCity. In its latest earnings release, Mapletree Commercial Trust shared some insights on the state of its various markets.

On the Singapore retail property market, the REIT said that “rental growth expectations are likely to be modest” because of “continual supply pressure in 2018.” But, the REIT added that “improvements in retail sales, tourism arrivals and receipts, if they endure, could help to spark some optimism in the retail market over the mid-term.”

Coming to the Grade A commercial property sector in Singapore, Mapletree Commercial Trust said that “modest rental growth is expected over the near term,” although “ e underlying strength of occupier demand remains patchy and uncertain.”

Lastly, there is the business park market in Singapore. The REIT said that the “market remained relatively quiet in Q3 2017 on the back of a muted demand environment and the absence of new supply.” It added that “business parks in the City Fringe are likely to be the biggest beneficiaries [from a widening of the rental gap between office and business parks] with room for rental growth as they are the de-facto choice for most tenants due to their higher quality and location.”

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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.