This week, a host of real estate investment trusts (REITs) will be releasing their latest quarterly earnings. I will be keeping an eye on two REITs in particular — Suntec Real Estate Investment Trust (SGX: T82U) and Fortune Real Estate Investment Trust (SGX: F25U).
New developments to boost DPU next year
Suntec REIT announced two acquisitions in Australia this month. Both acquisitions are expected to be accretive to distribution per unit (DPU) once completed.
In the quarter ended 31 March, Suntec REIT paid out DPU of 2.434 Singapore cents. However, this included a capital distribution of S$6.5 million. Excluding capital distribution, DPU would have been lower at 2.192 Singapore cents.
There was some good news for Suntec REIT unitholders. Firstly, the REIT enjoyed 3.3% higher footfall at its Suntec City mall, while tenant sales per square foot increased 1.3% from a year ago.
Secondly, Suntec REIT recently announced that 100% of the 381,000 square feet of office space at 9 Penang Road, which is currently under development, has already been pre-leased to UBS. The new property should start contributing to the REIT’s distributable income by the second half of 2020.
Lastly, Suntec REIT has a 50% stake in a commercial building located in Australia at Olderfleet, 477 Collins Street, which is also set to be completed in 2020.
These two properties should boost DPU when they are completed.
Higher DPU expected in the first half of 2019
Unlike most other REITs listed in Singapore, Fortune REIT only releases earnings updates every six months instead of each quarter. As such, there will be a lot to digest when the REIT releases its results on Friday.
In 2018, Fortune REIT had a rental reversion rate of 12.7%, while DPU increased by 1.0% despite a major asset enhancement initiative (AEI) at Kingswood (the biggest shopping centre in its portfolio) and the disposal of one of its assets that year.
Fortune REIT also boasts the lowest gearing ratio in Singapore at just 20.9%. This affords it plenty of room to make yield-accretive acquisitions should an opportunity arise.
Key things to look out for when their earnings results are released is updates on the AEI at Kingswood and the DPU impact from the higher rental reversions secured in 2018.
It will also be interesting to learn from management about where they see Hong Kong’s economy heading and the impact on businesses in Hong Kong due to the protests.
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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 Fortune Real Estate Investment Trust.