Recent fears over interest rate hikes and challenges in the Singapore property market have lead to subdued returns for REITs over the last 12-month period. On average, the 40 REITs and stapled trusts listed in Singapore returned a measly 2.6%.
That said, six of these trusts, even in the challenging environment and impending interest rate hikes, had total returns of more than 10%. Here are the top three performers in this sector.
Keppel DC REIT (SGX:AJBU) is the first on the list with a 12-month return of 14.1%. Listed in 2014, it is the first pure play data centre REIT listed in Asia. Its portfolio currently consists of 15 data centres located in ten cities across eight countries in the Asia Pacific and Europe. This includes three in Australia, one in Germany, two in Ireland, one in Italy, one in Malaysia, four in Singapore, one in the Netherlands and two in the United Kingdom.
Data centres are specialised facilities used to house computer systems such as telecommunication and storage systems. Unlike regular real estate, data centres need special design considerations, backup power supplies and large amounts of electricity. The specific requirements make it more difficult for competitors to encroach on its business.
In the first quarter of 2018, Keppel DC REIT reported a 3.4% increase in adjusted distribution per unit. It had an aggregate leverage of 37.4%. It also completed its first acquisition in Germany, expanding its geographical footprint. At the time of writing, units of Keppel DC REIT exchanged hands at S$1.36 per unit. This translates to a price-to-book ratio of 1.4 and a distribution yield of 5.2%.
Mapletree North Asia Commercial Trust (SGX:RW0U), with a 12-month return of 13%, comes in at second place. Formerly known as Mapletree Greater China Commercial Trust, it invests in commercial properties in Hong Kong, China and most recently, Japan. It is the fourth REIT sponsored by Mapletree Investments Pte Ltd.
The REIT has a portfolio consisting of two large properties in China, one in Hong Kong and six properties in Japan, which were acquired in March this year.
In its last financial year (which ended in March 2018), the trust achieved a 1.9% increase in distribution per unit due to higher rental rates. Notably, it had positive rental reversions on its properties in Hong Kong and China.
Furthermore, the rental income from its new acquisitions in Japan will start contributing from this quarter onwards, providing visible revenue growth. The trust has also highlighted that it expects the addition of the Japan properties to be yield-accretive, adding 3.6% on a pro-forma basis.
Units of Mapletree North Asia Commercial Trust currently trade at S$1.16 per unit. This is 17% below the book value, and the units have a distribution yield of 6.5%.
Mapletree Industrial Trust (SGX:ME8U) completes the list with its 12-month return of 12.7%. The REIT invests primarily in industrial properties and data centres. It currently has 99 properties, comprising 85 industrial properties in Singapore and 14 data centres in the United States. Just like Mapletree North Asia Commercial Trust, Mapletree Industrial Trust is sponsored and managed by the Mapletree Investments Pte Ltd.
Mapletree Industrial Trust has an enviable track record of growth, growing its distribution per unit from 8.41 Singapore cents in FY11/12 to 11.75 Singapore cents in FY17/18, which ended on 31 March 2018.
In its most recent quarter, distribution per unit rose 2.4% year-on-year while distributable income grew 7.2%. It has an aggregate leverage of 33.1% and portfolio occupancy rate of 90%.
At the time of writing, units of Mapletree Industrial Trust exchanged hands at S$1.98 per unit. This translates to a price-to-book ratio of 1.3 and a distribution yield of 5.9%.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has a recommendation on Mapletree Industrial Trust. Motley Fool Singapore contributor Jeremy Chia owns units of Keppel DC REIT.