Distribution per unit (DPU) growth is crucial when investing in real estate investment trusts (REITs). A REIT that can consistently increase its DPU will not only provide the investor with higher distribution, its unit price will likely appreciate along with the DPU growth.
With that, here are two REITs that have increased their DPU in the last quarter.
Frasers Logistics and Industrial Trust (SGX: BUOU)
With a portfolio valued at A$3.0 billion, Frasers Logistics and Industrial Trust is one of the larger industrial REITs in Singapore. Its investment portfolio consists of 61 properties in Australia, 17 in Germany and four in the Netherlands.
In the July to September quarter, the REIT managed to increase its distribution per unit by 0.6%. While a 0.6% increase may not seem like much, it is actually impressive if you consider that foreign currency fluctuations went against it this quarter. On a constant currency basis, Frasers Logistics and Industrial Trust would have delivered a higher DPU growth.
Besides the increase in DPU this quarter, the REIT also looks set for sustained organic income growth in the future. Its Australian portfolio has an average annual rental increment rate of 3.1%, while its European portfolio has a built-in consumer price index-linked rental increment. The built-in increments in the tenant contracts provide Frasers Logistics Industrial Trust with visible rental growth in the future.
Frasers Logistics and Industrial Trust also has a well-managed balance sheet with a debt-to-asset ratio of 34.6%. The low gearing ratio gives the trust debt headroom to make more yield-accretive acquisitions that can benefit unitholders.
At its current price of S$1.06 per unit, the REIT has a price-to-book ratio of 1.12 and a distribution yield of 6.2%.
Mapletree Logistics Trust (SGX: M44U)
Mapletree Logistics Trust is another trust that focuses on logistics real estate. Its investment strategy is to invest in properties that are built to modern specifications and are located near major expressway in established logistics clusters.
For the quarter that ended on 30 September, Mapletree Logistics Trust’s gross revenue increased by 13.8% and DPU jumped 3.8%. The trust cited improved performance from its existing portfolio and contribution from two acquisitions in Hong Kong.
Besides the strong financial results over the last quarter, Mapletree Logistics Trust has also planted seeds for its future. It is in the midst of constructing 12 properties in China, with another 13 already completed and leasing in progress. The new developments will add to rental income when leased.
The acquisition of five ramp-up properties in Singapore and a 50% stake in 11 Grade-A properties in China will also provide a boost to DPU in the future.
At its current price of S$1.28 per unit, Mapletree Logistics Trust has a price-to-book value of 1.0 and a distribution yield of 6.1%.
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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 Jeremy Chia owns units in Frasers Logistics and Industrial Trust.