3 REITs That Have The Biggest Capacity For Acquisitions

Back in April, I wrote an article that discussed why I look for REITs that have a low gearing ratio. A REIT that has a low gearing ratio (an indicator of debt level) has greater financial capacity to increase its debt load to make yield-accretive acquisitions.

This type of acquisitions are beneficial to unitholders as they will increase the distribution per unit, and likewise increase shareholder value. As a follow up to that article, here are three REITs with the lowest gearing ratio in Singapore.

SPH REIT (SGX: SK6U) is a Singapore-based real estate investment trust that owns the landmark Orchard Road shopping mall, Paragon, and The Clementi Mall. The two properties have a combined value of S$3.3 billion and an aggregate net lettable area of 910,000 square feet. Notably, the REIT has been able to maintain a 100% occupancy rate for its properties. As of 31 March 2018, SPH REIT had a gearing ratio of just 25.4%, which is the lowest among REITs and stapled trusts in Singapore. At its last traded price of S$0.995 per unit, it had a price-to-book ratio of 1 and a distribution yield of 5.5%.

Fortune Real Estate Investment Trust (SGX: F25U) is a Hong Kong-based retail REIT that is listed in both Hong Kong and Singapore. It has a portfolio of 16 properties located around Hong Kong. The trust has an impressive track record of growing its distributions per unit (DPU) each year, with DPU more than doubling from 2010 to 2017. As of 31 March 2018, Fortune REIT had a gearing ratio of 27.4%. This is the second lowest among REITs in Singapore, and it has a sizeable debt headroom of HK$12.7 billion to fund acquisitions. At the time of writing, units of Fortune REIT exchanged hands at HK9.42 per unit. This translates to a price-to-book ratio of just 0.67 (which is also among the lowest in Singapore) and a distribution yield of 5.4%.

EC World Real Estate Investment Trust (SGX: BWCU) completes this list. It mainly invests in specialised, e-commerce and supply-chain logistics real estate in China. The trust is fairly new as it was listed only in 2016. However, in 2017, it did manage to beat both its revenue and distribution forecast by 1% and 1.5% respectively. It currently has a gearing ratio of just 28.9%. At its last traded price of S$0.72, it had a price-to-book ratio of 0.77 and an attractive distribution yield of 8.3%.

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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 Jeremy Chia owns units in EC World Real Estate Investment Trust.