DigiCore Reit USD

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Daiwa Hse Log Tr

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These four beaten-down REITs look interesting to own for the long term.

If you’re an investor, it’s always useful to keep some cash handy.

With volatility roiling the stock market and pessimism setting in, opportunities may appear to buy shares on the cheap.

REITs are a great place to start looking as rising interest rates have dampened sentiment for the sector.

These reliable income instruments can provide you with a steady stream of passive income well into your retirement years.

If you have S$10,000 to spare, you can consider these four REITs for your buy watchlist.

Mapletree Pan-Asia Commercial Trust (SGX: N2IU)

Mapletree Pan-Asia Commercial Trust, or MPACT, was formed through the merger of Mapletree Commercial Trust and Mapletree North Asia Commercial Trust.

MPACT owns 18 properties across five markets – Singapore, China, South Korea, Japan, and Hong Kong SAR, with assets under management (AUM) of S$17.1 billion and a net lettable area of 11 million square feet.

The merged REIT will have a high occupancy rate of 97.2% with aggregate leverage of 38.8%.

44% of MPACT’s AUM is in retail, with 35% in offices and the remaining 21% in business parks.

MPACT also has a well-diversified tenant portfolio with the largest tenant, Google’sAlphabet(NASDAQ: GOOGL), taking up 5.7% of the REIT’s gross rental income.

As of 31 March 2022, the REIT has debt headroom of close to S$4 billion.

The manager for MPACT will adopt a “4R” asset and capital management strategy to stabilise and then grow the REIT.

4R stands for recharge, reconstitute, resilience, and refocus.

It will focus on acquisitions of office and business park assets while looking for suitable opportunities to divest assets to unlock value.

Digital Core REIT (SGX: DCRU)

Digital Core REIT, or DCR, owns a portfolio of 10 data centres in the US and Canada worth US$1.46 billion as of 30 June 2022.

The data centres enjoy full occupancy and have a long weighted average lease expiry (WALE) of 5.2 years.

DCR reported its maiden financial result for the first half of 2022 (1H2022).

Gross revenue was largely in line with forecast at US$52.8 million but the distributable income was 2.2% lower due to higher property expenses.

Distribution per unit for 1H2022 was 1.4% lower than forecast at US$0.0206.

Including the period from 6 December till end-2021, the total DPU declared by DCR came up to US$0.0237.

Annualising the 1H2022 DPU, we get US$0.0412, and the REIT’s units are providing a forward yield of around 5.2%.

DCR has identified acquisition targets in Frankfurt, Chicago or Dallas that are expected to be accretive to DPU.

Its current gearing level is just 25.7% with an average cost of debt of 2.3%.

Daiwa House Logistics Trust (SGX: DHLU)

Daiwa House Logistics Trust, or DHLT, owns a portfolio of 14 high-quality logistics properties across Japan.

Total AUM stands at around JPY 81 billion as of 31 December 2021.

Gross revenue for 1H2022 was 3.6% below forecast while net property income was 4.5% lower than projected at S$30 million.

DPU, however, was in line with the forecast of S$0.0309.

The portfolio has maintained a high occupancy rate of 98.6% as of 30 June 2022 and all leases that were due to expire in 1H2022 have been renewed.

The good news is that the average rent of renewed and new leases was up by 3.1%, and DHLT maintained a long WALE of 6.8 years.

With the consumption tax loan refunded in April 2022, aggregate leverage stood at 34% for the REIT with 100% of its loans on fixed rates.

ARA US Hospitality Trust (SGX: XZL)

ARA US Hospitality Trust is a hospitality trust with a portfolio of 40 select-service hotels with a total of 5,214 rooms across 21 states in the US.

In line with the global recovery in air travel, the trust has reported a strong year on year performance for 1H2022.

Revenue jumped 53.8% year on year to US$81.3 million while net property income more than doubled year on year to US$21.1 million.

Because of the better performance, distribution per stapled security (DPSS) increased four-fold from S$0.00355 in the second half of last year to S$0.01427 in 1H2022.

Gearing was, however, fairly high at 43.5%.

The good news is that 80% of ARA US Hospitality Trust’s borrowings are on fixed rates.

Meanwhile, the gradual return of business and leisure demand should lead to a full recovery in US hotel market occupancy while also driving further increases in revenue per available room.

These trends should bode well for the hospitality trust, giving it room to further raise its DPSS.

source：The Smart Investor