It’s earnings season again. Given many real estate investment trusts (REITs) are reporting 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 Parkway Life REIT (SGX: C2PU). As a quick background, Parkway Life REIT is one of the largest listed healthcare REITs in Asia by asset size. The REIT has ownership over three private hospital properties locally and has stakes in 46 healthcare-related assets in Japan. It also has strata-titled units/lots in Gleneagles Intan Medical Centre in Malaysia.
For the quarter ended 30 September 2018, gross revenue grew 2.5% to S$28.4 million while net property income (NPI) improved by 2.5% to S$26.5 million as compared to the same period last year. The higher NPI was due to contribution from one nursing rehabilitation facility acquired in February 2018 and higher rent from the Singapore properties. Yet, distribution per unit (DPU) declined by 4.1% as compared to the same period last year to 3.23 cents. Excluding one-off distribution of divestment gain last year, DPU would have increased by 2.7%.
As of 30 September 2018, the REIT’s gearing stood at 37.7% and its committed occupancy rate was 100%.
Yong Yean Chau, chief executive of the REIT’s manager, commented:
“We remain committed in preserving the resiliency of our earnings within this environment of rising interest rates and market uncertainties. In the past quarter, we have successfully refinanced all loans due in 2019 as part of our liquidity risk management strategy and continued to manage our exposure to interest rate and foreign currency risks. This has been done to enhance the defensiveness of PLife REIT’s balance sheet, to safeguard the stability and resiliency of our distributions to Unitholders.”
The next REIT on the list is Suntec Real Estate Investment Trust (SGX: T82U). Suntec REIT currently has interests in retail malls and offices in Singapore and Australia. Its portfolio includes Suntec City, one-third interest in One Raffles Quay, a commercial building in Sydney and a 50% stake in Southgate Complex in Melbourne, just to name a few.
For the quarter ended 30 September 2018, gross revenue declined by 2.5% to S$88.8 million while NPI fell by 11.4% to S$56.5 million. The weaker performance was due to lower contribution from 177 Pacific Highway and Suntec City office, and higher expenses on sinking fund contribution for Suntec City office upgrading works.
On the positive front, the REIT’s DPU was up by 0.3% year-on-year to 2.491 cents. As of 30 September 2018, the REIT’s gearing stood at 38.2%. Its committed occupancy rate was 98.9% and 98.1%, respectively, for its office and retail properties at end of the quarter.
Chan Kong Leong, chief executive of the REIT’s manager, said:
“We are pleased to report that our retail business continued to improve in the third quarter of 2018. The multi-pronged strategy that we have executed for Suntec City mall had yielded positive results and the mall is poised to continue to perform well, notwithstanding the continuing challenges in the retail sector.
Our additional 25% interest in Southgate Complex also contributed to the stronger performance this quarter. This was however offset by higher financing costs, transitory downtime in Suntec City office and the weakened Australian dollar.”
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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 has a recommendation for Parkway Life REIT.