While there are many REITs out there offering exposure to overseas markets, investors should differentiate between two types: those that offer a diversified spread of countries within a property sub-type (such as industrial, for instance), and those that offer concentrated exposure to a specific country within a sub-type, such as hospitality or industrial.
I generally prefer REITs that offer diversification across countries in order to mitigate the effects of a slowdown in any one particular country. However, this means the potential growth prospects for the REIT are also watered down as the portfolio is spread out over a greater number of countries.
Here are three overseas REITs that offer concentrated exposure to just one country each, also known as “pure-play” overseas REITs. Investors should note that all three markets are witnessing healthy growth in their respective markets.
1. Ascendas India Trust
Ascendas India Trust (SGX: CY6U) is the first Indian property trust listed on SGX. Its focus is to own a portfolio of income-generating real estate used primarily as business space in India. AIT’s portfolio consists of seven IT business parks and one logistics park in India. As of 30 June 2019, AIT’s assets under management stand at S$1.9 billion.
In Q1 2020 (AIT has a 31 March year-end), AIT reported a 13% year-on-year rise in net property income (in SGD terms) while distribution per unit (DPU) surged 28% year on year to 2.05 Singapore cents. AIT has entered into an agreement in June 2019 to acquire BlueRidge 3, a special economic development zone located in Pune. In July 2019, the REIT entered into an agreement to acquire the seventh warehouse near Navi Mumbai. These two acquisitions should continue to drive growth for the REIT and boost long-term DPU.
2. Sasseur REIT
Sasseur REIT (SGX: CRPU) is the first outlet mall REIT listed in Asia. The REIT invests in the fast-growing retail outlet mall sector in China, and its initial portfolio consists of four quality retail outlet mall assets located in cities such as Chongqing, Kunming, and Hefei, with a total net lettable area of 312,844 square metres.
Sasseur has exceeded its DPU projections for the fifth consecutive quarter in Q2 2019, with DPU coming in at 1.608 Singapore cents, 10.5% higher than projected. Combined sales from all outlet malls saw a 15.4% year-on-year increase to RMB 1.03 billion for the quarter. For Q3 2019, the REIT is confident that sales and footfall will pick up as major overnight annual promotion events will be held in September.
3. ARA US Hospitality Trust
ARA US Hospitality Trust (SGX: XZL) invests in income-producing real estate assets used primarily for hospitality purposes in the United States. Its initial portfolio consists of 38 upscale select-service hotels across 21 states in the US with a total of 4,950 rooms valued at US$719.5 million. These hotels live under the “Hyatt House” and “Hyatt Place” brands.
ARA offers an avenue for investors to invest in a new asset class — service hotels — and its performance post-IPO has also been impressive, with DPU beating forecast by 3.8% to 1.36 US cents compared to 1.31 US cents. Hyatt House hotels recorded strong occupancy rates of 87.2% and revenue per available room (revpar) of US$123, which also exceeded forecasts. As of 30 June 2019, its gearing level was 31.9%, providing the REIT with additional debt headroom to borrow for accretive acquisitions.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.