2 REITS That Have Delivered Weaker Quarterly Performances Recently

REITs have always been one of the favourite investment choices for risk-adverse investors due to their stable earnings.

Yet, there is no guarantee that all REITs will continue to improve their performances all of the time.

In this article, we will look at two REITs that have delivered weaker performance in their latest quarterly results.

The first REIT is Frasers Commercial Trust (SGX: ND8U) or FCT.

FCT is a REIT that focusses primarily on commercial properties. It has ownership stakes in six properties located in Singapore and Australia. Its portfolio includes China Square Central, 55 Market Street and Alexandra Technopark in Singapore.

In the latest quarter ending 31 March 2018, gross revenue declined 18% year-on-year to S$ 33.0 million, whilst net property income (NPI) fell by 26.1% year-on-year to S$22.6 million. Distribution per unit (DPU) was down by 4.4% as compared to the same period last year to 2.4 cents. The weaker performance was due to lower occupancy rates in a number of properties, planned vacancies for asset enhancement initiatives, the weaker S$ to AUS$ exchange rate and higher expenses for Caroline Chisholm Centre.

In January 2018, FCT completed the acquisition of 50% interest in Farnborough Business Park (FBP) at a property value of £87.5 million. Mr Jack Lam, Chief Executive Officer of the Manager commented on the acquisition of FBP:

 “Farnborough Business Park is an award-winning, high-quality asset with solid fundamentals, and we are delighted to see its accretive contribution commencing from the end of January 2018. We will look to extract further value from the property and grow its income contribution even more going forward.

Farnborough Business Park is also part of Frasers Property Group’s network of business parks totalling more than 3 million square feet in the Thames Valley, which will see it benefitting from economies of scale and other synergistic values afforded by the portfolio.”

As of 31 March 2018, the REIT’s gearing stood at 35.3% and its committed occupancy rate stood at 83.54%.

Soilbuild Business Space REIT (SGX: SV3U) or SBS REIT is another REIT that announced weaker quarterly result recently.

SBS REIT is a REIT that invests primarily in industrial and business parks properties in Singapore. The REIT’s properties include Solaris, West Park BizCentral, Eightrium and others.

Mr Roy Teo, CEO of the Manager, commented:

“The industrial property market remains soft with competing supply negatively impacting our occupancy and rental rates. We are making headway with the restructuring of Soilbuild REIT’s portfolio and strengthening its tenants mix. With the divestment of KTL Offshore, marine offshore and oil and gas sectors account for only 6% of revenue. We have also received 6 months of cash security deposit from NK Ingredients Pte. Ltd. as they continue operating in our premises. We are now in a better position to benefit from a potential recovery of the industrial property market.”

Financially, gross revenue declined 11.5% from the previous year to S$19.4 million, while net property income declined 11.6% to S$17.0 million. Distribution per unit (DPU) was down 11.1% year-on-year to 1.4489 cents. The weaker performance was due to the loss of income following the sale of KTL Offshore on February 2018, lower revenue from 72 Loyang, and lower occupancies at West Park BizCentral and Eightrium. As of 31 March 2018, the REIT’s gearing stood at 40.2% whilst occupancy stood at 87.5%.

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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.