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2 REITs That Have Delivered Weaker Quarterly Performances Recently

Real estate investment trusts (REIT) has always been one of the favourite investment choices for risk adverse investors due to its stable earnings qualities. Yet, there is no guarantee that all REITs will continue to improve its performance all the time. Today, we will look at two REITs that delivered weaker performance in their latest quarterly results.

The first REIT on the list today is Frasers Commercial Trust (SGX: ND8U) or FCT.

As a quick introduction, FCT is a commercial-based REIT that has ownership stakes in six commercial properties located in Singapore, Australia and the United Kingdom. The REIT’s portfolio includes China Square Central and Alexandra Technopark in Singapore.

In its latest quarter ended 30 June 2018, FCT’s gross revenue declined 15.2% year-on-year to S$32.5 million while net property income (NPI) fell by 19.2% year-on-year to S$21.6 million. Distribution per unit (DPU) was down from 2.41 cents a year ago to 2.40 cents in the reporting quarter. The weaker performance was due lower occupancy rate for Alexandra Technopark, China Square Centre, 55 Market Street and Central Park, and a weaker Australian dollar.

On 31 August 2018, FCT completed the divestment of 55 Market Street to an unrelated third party for S$216.8 million.

Mr Jack Lam, Chief Executive Officer of the Manager commented on FCT prospects:

“Long-term growth will also come from enhancing our assets and on that note we are pleased that the revamp of Alexandra Technopark is nearing completion and has already garnered very encouraging feedback from tenants and other stakeholders. Likewise, we eagerly look forward to completing the rejuvenation of the retail podium at China Square Central in the later part of 2019.”

As of 30 September 2018, the REIT’s gearing stood at 28.3% and its committed occupancy rate stood at 83.4%.

Frasers Centrepoint Trust (SGX: J69U) is the second REIT that has reported weak earnings update.

As a quick introduction, Fraser Centrepoint Trust is a retail-based REIT with a portfolio comprising of suburban retail properties in Singapore, namely Causeway Point, Northpoint City North Wing (including Yishun 10 Retail Podium), Anchorpoint, YewTee Point, Bedok Point and Changi City Point. The REIT also holds a 31.15% stake in Hektar Real Estate Investment Trust, a retail-focused REIT in Malaysia.

For the quarter ended 30 September 2018, Frasers Centrepoint Trust reported that gross revenue grew 0.5% to S$48.5 million while net property income declined by 4.9% to S$32.9 million. The lower net property income was due to higher expenses. Similarly, the REIT’s distribution per unit (DPU) was down by 3.6% year-on-year to 3 cents, mainly due to the lower net property income. During the quarter, 49 leases accounting for 4.1% of FCT’s total net lettable area were renewed at an average rental reversion of +0.2%.

FCT also commented on its outlook:

 “Excluding motor vehicles, retail sales index increased 2.4% year-on-year in August 2018. We expect the performance of our suburban malls to remain stable. Northpoint City North Wing, having stabilised following the completion of its asset enhancement exercise, has helped raised earnings.”

As of 30 September 2018, the REIT’s gearing stood at 28.6% and its committed occupancy rate stood at 94.7%.

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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. The Motley Fool Singapore has a recommendation on Frasers Centrepoint Trust.