Since debuting in the Singapore market in 2002, Real Estate Investment Trusts (REITs) have grown to become one of the more popular investment vehicles. Besides consistent and relatively high yields, REITs are also highly liquid and provide exposure to a wide variety of real estate.
On top of the consistent distribution per unit (DPU), REITs that are able to grow their DPU over time can help investors grow their income and are also more likely to appreciate in value. With that, here are two promising REITs that have increased their DPU in the first three months of 2019.
Retail malls still thriving in Singapore
CapitaLand Mall Trust (SGX: C38U) reported a solid set of results for the first three months of 2019. The trust, which owns 15 malls in Singapore reported an 11.5% increase in net property income compared to the same period last year. More importantly, its distributable income and DPU increased by 7.4% and 3.6% respectively. The growth largely came from the contribution of the recently-acquired 70.0% balance interest in Westgate in late November.
Beyond the strong financials this year, CapitaLand Mall Trust looks set to continue to reward unitholders in the coming years. Funan, which has been under construction for three years, is set to re-open in the middle of this year and is already 90.0% leased. This should add another stream of rental income. In addition, the REIT managed to sign new leases at a 1.2% positive rental reversion rate, which should also boost its topline revenue in the coming quarters.
At the time of writing, CapitaLand Mall trust units exchange hands at S$2.43 apiece. This translates to a price-to-book ratio of 1.19 and an annualised distribution yield of 4.7%.
Riding on the growth of e-commerce
Another exciting REIT is EC World Real Estate Investment Trust (SGX: BWCU), which is trying to ride the growing trend of e-commerce in China. The trust owns e-commerce logistics properties and specialised logistics real estate. In the first three months of 2019, while net property income declined 1.4% due to a weaker Chinese Yuan, EC World still eked out a 3.1% increase in DPU due to the absence of a withholding tax they incurred in the same period last year.
But, more importantly, EC World looks likely to continue rewarding unitholders with higher DPU in the future. First, it has long leases with built-in rental annual escalation rates that are likely to provide additional rental income each passing year. In addition, the REIT recently announced a proposal to buy another e-commerce property for S$220.97 million from its sponsor. The newly-acquired asset sits on 88,000 square meters of land and consists of a three-story warehouse and two 14-story support office buildings.
The property has two master leases with a five-year tenure, with the option of extending another five years. The master leases also have a built-in rental escalation of 2.25% per annum, providing additional upside each year. According to the acquisition proposal slides, the acquisition would have boosted EC World’s 2018 DPU by 1.6% on a pro forma basis and increased net asset value per unit by 1.4%.
If the proposal goes through, this acquisition should be accretive to unitholders and provide additional growth in the future. Currently, EC World REIT units trade at S$0.79 each, which translates to a price-to-book ratio of 0.90 and an attractive distribution yield of 7.8%.
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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 of EC World Real Estate Investment Trust. Motley Fool Singapore has recommended the shares of Capitaland Mall Trust.