2 REITs with More Than 7% Yields That Have Exposure to the China Retail Market

Property in China is certainly highly sought after. Rising medium-income population and a growing population in tier 1 and 2 cities in China have both been catalysts to the double-digit annual growth in property prices. Even with the government introducing property cooling measures to try to control the pace of appreciation, analysts still believe that property prices are likely to continue to grow along with the economy.

With that in mind, here are two REITs with high distribution yields that can give investors exposure to the fast growing China retail market.

BHG Retail REIT (SGX: BMGU) is a pure-play China retail REIT that was listed in Singapore back in late 2015. Its portfolio comprises five retail properties located in important cities in China. Two of the five malls are master-leased for more than 15 years, providing income stability to the REIT. The other three malls are multi-tenanted, giving the REIT the capacity for organic income growth.

BHG Retail REIT has also maintained a relatively low gearing ratio (a measure of debt against its assets) of 33%, well below the regulatory cap of 45%. The low gearing affords the REIT additional headroom to fund further acquisitions or to undertake asset enhancement projects.

In addition, the managers of the REIT have ensured that its tenants are mostly from the “experiential sector”, reducing the impending impact of e-commerce on visitor footfall. As of 31 March 2018, more than 80% of net lettable area in its malls is leased to tenants in the “experiential sector”.

At the time of writing, units of BHG Retail REIT exchanged hands at S$0.76 per share. This translates to a price-to-book ratio of 0.90 and an attractive distribution yield of 7.2%.

Dasin Retail Trust (SGX:CEDU) has a portfolio of four retail malls located in Zhongshan and Guangdong, China. The trust was listed only in early 2017 and is considered one of the younger REITs in Singapore.

The trust achieved 100% occupancy rate in the first quarter of 2018, showcasing its ability to attract tenants and shoppers to its malls. It also has a comparatively long weighted average lease expiry of 4.01 years by gross rental income, giving the REIT stable income for the next few years.

Like BHG Retail REIT, Dasin Retail Trust also has one of the lowest gearing ratios among REITs in Singapore. As of 31 March 2018, Dasin had a gearing ratio of just 30.4%.

Perhaps the most attractive thing about this trust is the fact that it has one of the cheapest valuations in the market. At its current price of S$0.865 per unit, it trades at 45% discount to its book value and has a distribution yield of 8.2%.

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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 doesn’t own shares in any companies mentioned.