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2 REITS That Have Delivered Mixed Performances Recently

It’s earnings season again. Given many REITs reported their results at the same time, it would be useful to group them into three categories – good, bad and mixed. In this article, I will look at two REITs that have recently delivered mixed financial results.

Let’s start with Cache Logistics Trust (SGX: K2LU). As a quick background, Cache Logistics Trust is a real estate investment trust (REIT) that focuses on logistics properties. It currently has 27 logistics warehouse properties in its portfolio which are located in Singapore, Australia, and China.

In the latest quarter earnings update, gross revenue grew 7.7% to S$30.0 million. Yet, net property income (NPI) declined by 0.1% to S$21.6 million mainly due to higher expenses and vacancy at CWT Commodity Hub. Moreover, the REIT’s distribution per unit (DPU) was down by 17.6% year-on-year to 1.419 cents, mainly due to lower income for distribution and an increase in the unit count from a rights issue. As of 30 June 2018, the REIT’s gearing stood at 35.3% and its committed occupancy rate stood at 96.8%.

Daniel Cerf, chief executive of the REIT’s manager, commented:

“With our continuing efforts at rebalancing and growing the portfolio, Cache’s operating metrics remained healthy, notwithstanding the weakness in our DPU. During the quarter, we successfully executed 15 new leases and renewals totalling 762,000 square feet, achieving a strong committed portfolio occupancy of close to 97%, with only 3.1% of the portfolio due to expire in the second half of the year.

The acquisition of a full control in the Manager and the Property Manager by ARA is also a significant development for Cache. ARA, which currently manages approximately S$7 billion in gross assets under management by the Group and its Associates in Australia, was a key contributor to the REIT’s successful diversification strategy. We will continue to tap on ARA’s expanded network and resources in the Asia Pacific to further the growth of the REIT and its earnings.”

The next REIT on the list is CapitaLand Retail China Trust (SGX: AU8U) or CRCT. As a quick introduction, CRCT is a Singapore-based REIT that invests in retail real estate in China.

Gross revenue for the reporting quarter declined 4.6% to S$56.3 million while net property income reduced by 5.9% to S$37.6 million. The lower NPI was due to divestment of CapitaMall Anzhen with effect from 1 July 2017 and lower revenue from CapitaMall Grand Canyon. This loss off income was partially offset by Rock Square‘s contribution, which was accounted for under the share of results (net of tax) from joint venture. Despite reporting lower NPI, CRCT’s DPU grew 0.8% year-on-year to 2.64 cents. As of 30 June 2018, the REIT’s gearing stood at 32.1% while its committed occupancy rate stood at 97.4%.

Tan Tze Wooi, chief executive of the REIT’s manager, said:

“We are pleased that our portfolio reconstitution efforts and proactive asset management are showing positive results, delivering a double-digit growth for 2Q 2018’s distributable income. Rental reversions at our core multi-tenanted malls for the quarter averaged a healthy 10.5%, while portfolio occupancy as at 30 June 2018 was resilient at 97.4%.

Since acquiring Rock Square on 31 January 2018, we have focused on extracting the lease renewal upside while enhancing the mall’s tenant mix. This strategy led to strong rental reversions at Rock Square averaging above 20% for the second consecutive quarter. New entrants in the mall include a digital experience store by Xiaomi and popular beverage store Nayuki Tea. To optimise Rock Square’s layout and further expand its offerings, we created over 500 square metres of retail space by converting unutilised space and adding retail kiosks.”

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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. Motley Fool Singapore has a recommendation for CapitaLand Retail China Trust.