The Motley Fool

2 Attractive High-Yield REITs Offering Exposure to Europe

Real estate investment trusts (REITs) have skyrocketed in popularity in Singapore. Besides providing consistent dividends, REITs also give investors exposure to a wide variety of real estate in different markets, which were not previously accessible to the retail investor in Singapore.

With that said, here are two attractive REITs that offer unique exposure to the European market.

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Cromwell European REIT

Listed in November 2017, Cromwell European Real Estate Investment Trust (SGX: CNNU) has a portfolio of 102 properties located around Europe. Since its listing, the REIT, which is backed by Australian property giant Cromwell Group, has been aggressively making acquisitions to grow its portfolio.

Most recently, the REIT acquired six properties that were funded by a mix of equity raised through a private placement and debt. The acquisition is expected to be accretive to its distribution per unit (DPU).

On top of that, Cromwell European REIT has access to cheap debt of just over 1% and has a relatively low gearing ratio of around 35%. As such, it is in a good position to continue making more yield-accretive acquisitions in the future.

Besides its aggressive stance to grow through acquisitions, Cromwell European REIT also reported a blended 4.8% rental reversion rate in the second quarter of 2019. The higher rent from its existing properties will likely boost its DPU in the coming quarters.

Potential investors will also be pleased to note that Cromwell European REIT currently sports an attractive valuation. At the time of writing, it trades at €0.50 per unit, which translates to an annualised distribution yield of 8.2% and a 4.4% discount to book value.

IREIT Global

Listed in 2014, IREIT Global (SGX: UD1U) owns five freehold properties in Germany.

The REIT looks well-positioned to continue paying out a stable distribution. Its key tenants, which contribute 97.7% of rental income, have leases that expire in 2022 and beyond. Its two biggest tenants — Deutsche Telekom and Deutsche Rentenversicherung Bund — both have solid credit ratings and are established companies in Germany. As such, IREIT Global’s investors can be fairly certain that these two tenants are unlikely to default on their rent.

In addition, IREIT Global, like Cromwell REIT, also has access to relatively cheap debt. It has an effective interest rate of 1.5% per annum and a safe interest coverage ratio of 11.1 times. Its low gearing of 36.2% also affords it additional headroom to make yield-accretive acquisitions should an opportunity unfold.

At the time of writing, IREIT Global has a decent annualised distribution yield of 7.7% and has a price-to-book ratio of 1.

Want to keep reading on how to lock in those sweet REIT dividends? Our Complete Guide To Buying The Best Singapore REITs dives into what we think you need to know about finding the best REITs that regularly hand you a fat dividend cheque. Click here to download your FREE guide.

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 doesn’t own shares in any companies mentioned.