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These 2 REITS Delivered A Mixed Performance In Their Latest Quarterly Earnings

The earnings season has ended. As is common with every earnings season, there will be some real estate investment trusts (REITs) posting growth, some posting mixed numbers, and some experiencing declines. Let’s take a look at two REITs that delivered mixed numbers:

1. In early November, IREIT Global (SGX: UD1U) released its 2017 third quarter earnings. As a quick introduction, IREIT Global has a focus on investing in office, retail, and industrial real estate in Europe. Its portfolio currently comprises five freehold commercial properties located in Germany.

During the quarter, gross revenue grew by 1.7% year-on-year to €8.69 million. Net property income (NPI) was also up by 2.3% to €7.85 million. But, IREIT Global’s distribution per unit (DPU) fell by 9.6% year-on-year to 1.42 Singapore cents. The lower DPU was due to the retention of part of IREIT Global’s distributable income for the period, in accordance with its current distribution policy.

On another positive note, the REIT’s portfolio occupancy rate stood at 98.3% in the third quarter of 2017. It also has no leases expiring until 2019.

Aymeric Thibord, the chief executive officer of IREIT Global’s manager, shared the following comments in the earnings release on the REIT’s recent business performance and future plans:

“Sustained economic growth, healthy employment and favourable business prospects have continued to support the office sector in Germany, both in terms of leasing and investment. Looking ahead, we will forge ahead with our growth strategy to grow and diversify our portfolio across Europe to enhance IREIT’s long term income and returns for unitholders.”

As a reminder, IREIT Global changed its investment mandate in April 2017. Previously, the REIT focused predominantly on European commercial properties. The new mandate includes European industrial and retail properties, in addition to commercial real estate. This change in mandate was driven by Tikehau Capital, which acquired IREIT Global’s manager in late 2016.

2. EC World Real Estate Investment Trust (SGX: BWCU) is another REIT that released its 2017 third quarter earnings in early November.

As a quick introduction, EC World REIT is the first China-focused logistics REIT in Singapore’s stock market. It was listed in July 2016 and owns six properties in China that are mainly used for e-commerce, supply-chain management, and logistics purposes.

The REIT generated S$23.87 million in gross revenue during 2017’s third quarter, 5.5% better than the forecast given in its IPO prospectus. Its NPI was also 7.7% better than projected, coming in at S$22.09 million. The higher NPI was due to additional rental income from the completion of the asset enhancement initiative (construction of a sheltered warehouse) at Chongxian Port Investment, lower property expenses, and a favorable currency movement between the Singapore dollar and Chinese renminbi.

But despite a stronger NPI, the REIT’s distribution per unit (DPU) was 3.7% lower than the forecast, mainly due to a withholding tax incurred during the repatriation of cash from China. Excluding this impact, EC World REIT’s DPU would have been 2.3% higher than the forecast.

In its earnings release, EC World REIT gave some comments on its market environment. It said:

“In the third quarter of 2017, China’s economy expanded 6.8%, in-line with market expectations. Ecommerce industry in China continues to rapidly expand. According to China’s National Bureau of Statistics, online retail sales in China grew 34.2% in the first 9 months of 2017, more than triple the 10.4% growth rate in total retail sales in the same period.

All of ECW’s assets are currently located in Hangzhou and its GDP grew at a healthy 8.3%3 with the E-commerce sector expanding 38.5% in the first 9 months of 2017. Logistics is key to sustaining online retail sales growth, which in turn provides a highly favourable operating environment for ECW’s e-commerce logistics assets.”

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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.