REITs have always been one of the favourite investment choices for risk-averse investors due to its stable earnings qualities. Yet, there is no guarantee that all REITs will continue to improve their performance over time. In this article, I’ll look at two REITs that delivered weaker performance in their latest results.
The first REIT on the list is Keppel REIT (SGX: K71U). As a quick introduction, Keppel REIT is a real estate investment trust (REIT) with a focus on commercial properties in Singapore, Australia, and South Korea.
For the quarter ended 30 June 2019, Keppel reported that property income fell 22.7% year-on-year to S$ 39.9 million while net property income (NPI) declined by 28.1% during the period to S$ 31.3 million. The weaker performance was due to lower one-off income from Ocean Financial Centre and lower property income from Bugis Junction Towers. Consequently, distribution per unit (DPU) was down by 2.1% as compared to the same period last year to 1.39 cents.
As of 30 June 2019, the REIT’s gearing and occupancy ratios stood at 38.4% and 99.1%, respectively. In term of its outlook, here’s what the company said in its press release:
“Amidst the current uncertain macro-economic environment, the Manager remains focused on delivering stable and sustainable distributions to Unitholders, and on achieving long-term growth. The Manager will continue its ongoing portfolio optimisation focus, while driving operational excellence in its asset and capital management efforts.”
CapitaLand Retail China Trust
The next REIT on the list is CapitaLand Retail China Trust (SGX: AU8U) or CRCT. As a quick introduction, CRCT is a Singapore-based real estate investment trust (REIT) investing in retail real estate in China. The trust shopping malls are located in China, Hong Kong, and Macau.
Mr Tan Tze Wooi, CEO of CRCT’s manager, commented:
“Our proactive asset management efforts continue to yield positive results, with 1H 2019 rental reversions averaging 7.5%. New leases signed include popular brands and refreshing concepts that resonated with shoppers and enhanced our malls’ appeal as social spaces for families and young shoppers. Our effective leasing strategy has led to increases in shopper traffic and tenants’ sales, both of which grew by 6.7% in 1H 2019. Portfolio occupancy as at 30 June 2019 remained strong at 97.0%.
For the quarter ended 30 June 2019, gross revenue fell 1.9% to S$55.2 million while net property income improved 7.3% to S$40.4 million. The higher net property income was due to improved performance in CRCT’s multi-tenanted malls and lower property expenses. Yet, distribution per unit (DPU) fell 3.8% year-on-year to 2.54 cents. Excluding capital distribution, DPU would have grown 2.0% year-on-year.
As of 30 June 2019, the REIT’s gearing stood at 33.8% while its committed occupancy rate stood at 97.0%.
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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 recommended the shares of CapitaLand Retail China Trust.