These 2 REITs Delivered Growth In Their Latest Quarterly Earnings Updates

A new earnings season is underway.

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 growth? Let’s look at two of them:

1. In late January, Frasers Centrepoint Trust  (SGX: J69U) released its latest earnings update. It was for the first quarter of its fiscal year ending 30 September 2018 (FY2018) and the reporting period stretched from 1 October 2017 to 31 December 2017.

As a quick introduction, Frasers Centrepoint Trust is a REIT that owns suburban retail malls in Singapore. Its portfolio comprises six malls, which are Causeway Point, Northpoint City North Wing (including the Yishun 10 Retail Podium), Anchorpoint, YewTee Point, Bedok Point and Changi City Point.

During the reporting quarter, Frasers Centrepoint Trust’s gross revenue increased by 8.7% year-on-year to S$47.91 million while net property income did slightly better, growing by 9.1% to S$34.51 million. The REIT’s distribution per unit (DPU) came in 3.8% higher at 3 cents.

Frasers Centrepoint Trust attributed its growth to  the completion of the AEI (asset enhancement initiative) at Northpoint City North Wing, which drove an improvement in occupancy at the mall. Higher contributions from Causeway Point and Changi City Point also contributed to the REIT’s revenue growth. Frasers Centrepoint Trust’s portfolio ended the reporting quarter with a committed occupancy rate of 92.6%.

In its earnings release, Frasers Centrepoint Trust gave some short but useful comments on the outlook for its business:

“Singapore’s economy grew by 3.5% in 2017 in line with MTI’s [Ministry of Trade and Industry’s] forecast.

At Northpoint City North Wing, integration works with South Wing have been completed with 99% of the reconfigured areas leased and handed over to tenants.

Despite continuing headwinds and challenges in the retail sector, FCT’s well-located suburban malls are expected to remain resilient.”

2. Next up we have Mapletree Industrial Trust (SGX: ME8U), which also released its earnings update in late January. The REIT’s update was for the third quarter of its fiscal year ending 31 March 2018 (FY17/18) and the reporting period was from 1 October 2017 to 31 December 2017.

During its reporting quarter, Mapletree Industrial Trust experienced an 8.3% year-on-year increase in gross revenue to S$91.47 million. This led to its net property income jumping by 11.7% to S$70.86 million, and its DPU stepping up by 1.8% to 2.88 cents.

Mapletree Industrial Trust benefitted from new revenue contributions from its build-to-suit project for HP Singapore, which more than offset lower occupancy in its overall portfolio. Mapletree Industrial Trust focuses mainly on industrial properties; its portfolio consists of 85 industrial properties in Singapore and 14 data centres in the US. As of 31 December 2017, the REIT’s portfolio had a committed occupancy rate of 90.5%.

There were insightful comments given by the REIT on its business environment in the earnings release:

“Although the wider economy and business sentiment of the small and medium-sized enterprises are strengthening, possible downside risks in the external environment such as geopolitical risks and policy uncertainty could negatively affect the improvement in the business environment.

In addition, the continued supply of competing industrial space is expected to exert pressure on both occupancy and rental rates. The Manager will continue to focus on tenant retention to maintain a stable portfolio occupancy.

Economic expansion in the US is projected to continue in 2018, with continued support from private consumption and investment. According to 451 Research, the supply for US multi-tenant data centres (in net operational square feet) will grow by 9.0% while the demand will grow by 10.1% in 2018. This will underpin the stability of revenue contribution from the US portfolio.”

The 14 data centres that Mapletree Industrial Trust owns were acquired in December 2017. The REIT had co-invested with its sponsor, Mapletree Investments Pte Ltd, which holds the other 60% ownership in the 14 data centres. Mapletree Industrial Trust has the right of first refusal to acquire the 60% stake.

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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.