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These 2 REITS Delivered Strong Performances In 2018

The current earnings season is winding down, and I’ve been watching as companies and real estate investment trusts (REITs) report their full-year 2018 results. Today, I’m looking at two REITs that produced good results.

First up is CapitaLand Mall Trust (SGX: C38U). The REIT currently has 15 shopping malls that are mostly located in the suburban areas and downtown core of Singapore. The malls include Tampines Mall, Junction 8, Funan, IMM Building, Plaza Singapura, and Bugis Junction.

For 2018, CapitaLand Mall Trust reported that gross revenue was up 2.2% to S$697.5 million and net property income (NPI) grew 3.2% to S$125.7 million. The improvement in gross revenue and NPI was driven by two factors: (1) The November 2018 acquisition of the remaining 70% stake in Westgate the REIT did not own, and (2) higher rental income from certain properties. Consequently, CapitaLand Mall Trust’s distribution per unit for 2018 climbed by 3.0% to S$0.115.

Tony Tan, the CEO of CapitaLand Mall Trust’s Manager, shared the following comments on the REIT’s business in the latest earnings update:

“In 2018, we rejuvenated CMT’s portfolio by divesting Sembawang Shopping Centre and redeploying the proceeds into acquiring the remaining interest in Westgate — a higher-yielding quality asset. The equity fund raising exercise to partially finance the acquisition was more than 2.7 times covered, demonstrating investors’ continued confidence in CMT.”

As of 31 December 2018, CapitaLand Mall Trust had a gearing ratio of 34.2%, while the occupancy rate of its portfolio stood at 99.2%.

The other REIT I’m covering is Keppel DC REIT (SGX: AJBU), a REIT that owns and runs data centres. Listed in December 2014, the REIT’s portfolio consisted of 15 data centres in Asia and Europe at the end of 2018.

For 2018, Keppel DC REIT reported a 26.2% jump in gross revenue to S$175.5 million. NPI improved by a similar percentage of 26.0% to S$157.7 million. Keppel DC REIT attributed its gross revenue and NPI growth to acquisitions made in 2018 and 2017, as well as higher contributions from some existing assets. Consequently, the REIT’s distribution per unit (DPU) was up by 5.0% to S$0.0732 compared to 2017.

Here’s what the REIT shared about its outlook in the latest earnings update:

“In its Global Economic Prospects released in January 2019, the World Bank expects global growth to ease from 3.0% in 2018 to 2.9% in 2019, citing elevated trade tensions and international trade moderation.

In the data centre industry, BroadGroup expects factors that fuelled growth in 2018, including the rapid growth in data creation and storage needs, increasing digitalisation and cloud adoption, as well as the strong growth in colocation demand from hyperscale cloud players, to continue into 2019. Established data centre hubs are also expected to continue to grow in importance as they offer telecommunications reliability, power availability, and access to neighbouring markets. Improved connectivity as well as the development and adoption of new technologies, data centre outsourcing, as well as drivers such as data sovereignty regulations, will continue to support demand for data centres globally.

Keppel DC REIT, with its established track record and enlarged portfolio of assets in key data centre hubs in Asia-Pacific and Europe, is well-placed to benefit from the growth of the data centre market. The Manager will continue to maintain its focused investment strategy to capture value and strengthen its presence across key data centre hubs.”

As of 31 December 2018, the REIT’s gearing and occupancy ratios stood at 30.8% and 93.1%, respectively.

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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 CapitaLand Mall Trust.