Real estate investment trusts (REITs) have increasingly become one of the more popular investment vehicles in Singapore. Besides their capacity to appreciate in value, REITs also provide stable and consistent cash flow from their distributions. It is, therefore, no surprise to find more REITs choosing Singapore as their listing destination.
With that said, here are two recently-listed REITs that have beat their initial public offering (IPO) forecasts since their listings.
Sasseur Real Estate Investment Trust (SGX:CRPU)
Listed in March this year, Sasseur REIT has a portfolio of four outlet malls in China. There are a few differences between outlet malls and traditional shopping malls. Shops in outlet malls usually sell their products at steep discounts and are located in cheaper locations such as the suburbs. The lower rent gives brand owners higher profit margins and the high volume of sales, in turn, enables easier inventory management.
For the financial period from its IPO date on 28 March to 30 June 2018, Sasseur REIT earned S$32.3 million in rental income, 3% higher than initially predicted. Distributable income was 4.6% higher at S$18.7 million. Correspondingly, distribution per unit was 4.6% higher at 1.587 Singapore cents. Net asset value per unit was also 2.2% higher at 80.6 Singapore cents.
The trust had a high portfolio occupancy rate of 94.5% but has a relatively short weighted average lease expiry by gross revenue of 1.3 years. But the manager did say that this is a deliberate policy to capitalise on the strong growth of sales in its outlet malls. Total sales in each of the outlets beat IPO forecasts and were higher than the pro forma sales over the same period last year. Below is a table showing the outlet sales compared to the forecasts:
Source: Sasseur REIT 2018 Q2 Earnings Press Release
Units of Sasseur REIT are going at S$0.73 each at the time of writing, giving a price-to-book 0.905 and an annualised distribution yield of 8.7%.
Cromwell European Real Estate Investment Trust (SGX:CNNU)
Cromwell European REIT was listed in November last year. Like Sasseur REIT, it has performed better than expected since its listing.
In the seven-month period between its listing and June 30 2018, it recorded gross revenue of €72.8 million, 2.2% higher than the IPO forecast. Net property income was 3.1% higher at €47.7 million, while its distribution per unit was 3% higher. In addition, the REIT’s net asset value per unit increased over the last three months by 2.1% to €0.57.
The REIT has made a prudent acquisition since its listing by purchasing a property in Italy for €16.9 million in June. The property has an initial rental yield of 8.4% and sits on freehold land. Cromwell European REIT still has plenty of financial muscle to make more yield-accretive acquisitions in the future. It has a manageable gearing ratio of 34.8% and interest cover of 8.8 times.
At the time of writing, Cromwell European REIT’s units are exchanging hands at €0.60 per piece. This translates to a price-to-book ratio of 1.05 and an annualised distribution yield of 7.22%.
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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 writer Jeremy Chia doesn’t own shares in any companies mentioned.