Increased interest rates and inflation pulled the rug from many Singapore REITs this year as REIT managers scramble to improve their debt management and cost of capital. To deal with the increased costs, many REITs lowered their dividend payouts (aka distribution per unit) in 2023.
In the face of lowered dividends and the availability of low risks yields through government bonds and fixed deposits, investors sold off REITs, leading to a drop in prices.
Despite the tough macro economic situation, 3 S-REITs actually managed to increase their dividends!
Let’s take a closer look at these 3 REITs and how they managed to increase their DPU despite the adversity:
| REIT | YTD DPU | DPU increase (year-on-year) | YTD Performance | P/B Ratio | Gearing | Average Debt Duration |
|---|---|---|---|---|---|---|
| Frasers Hospitality Trust (SGX:ACV) | 2.4426 cents | 49.3% | 8.89% | 0.7x | 34% | 2.32 years |
| ParkwayLife REIT (SGX: C2PU) | 10.99 cents | 2.8% | -5.04% | 1.5x | 36% | 2.8 years |
| Mapletree Logistics Trust (SGX: M44U) | 4.539 cents | 0.9% | 6.33% | 1.1x | 38.9% | 3.8 years |
1) Frasers Hospitality Trust (+49.3%)
Frasers Hospitality Trust (FHT) owns a portfolio of hotels and serviced residences across 9 countries. As a hospitality trust, it was well positioned to benefit from the post pandemic recovery as air travel recovered strongly this year.
Hence, it managed to increase its DPU by a whooping 49.3%! Gross revenue is also up 28.5% y-o-y.
As Alex mentioned previously, FHT also managed to dispose a key Sofitel Sydnet asset which allowed the REIT to maintain a good gearing ratio.
FHT’s managers have highlighted possible tailwinds in terms of a slowing global GDP growth and geopolitical tensions in their latest report. They aim to continue to proactively manage their portfolio in order to unlock value and create growth through yield-accretive acquisitions going forward.
2) ParkwayLife REIT (+2.8%)
ParkwayLife REIT is a unique REIT that specializes in hospitals. In its latest 9M23 highlight, the REIT announced a 2.8% y-o-y growth in its DPU. This shouldn’t come as a surprise to investors as PLife has been increasing its DPU since its IPO.
The REIT also reported a 24.6% y-o-y growth in gross revenue, mostly due to signing a new master lease agreement for its Singapore hospitals.
Going forward, PLife aims to strengthen its presence in existing markets (Japan and Singapore) while building a 3rd key market (Malaysia) that can contribute growth in the mid to long term.
Alvin identified ParkwayLife REIT as one of the 4 S-REITs with moats.
3) Mapletree Logistics Trust (+0.9%)
Mapletree Logistics Trust (MLT) is an Asia focused logistics REIT with a diversified portfolio across 9 Asian countries.
As of Oct 2023, MLT announced a 2.268 cents DPU for 2Q FY23/24. This was a 0.9% y-o-y increase. In the prevailing quarter, MLT had also delivered a 3.1% DPU increase.
MLT maintained resilient operational performance underpinned by 96.9% occupancy and positive rental reversions across markets, except for China which registered a negative rental reversion of -8.6%.
MLT’s manager is actively rejuvenating their portfolio through a series of divestments and acquisitions.
Gross revenue is now positive at 1.5% y-o-y for the quarter, and total debt was decreased by S$173M, with 83% hedged at fixed rates.
Alongside FHT, MLT was one of the 14 REITs that have delivered positive returns in 2023.
Can REITs make a comeback in 2024?
2023 presented significant challenges for Singapore REITs, primarily due to rising interest rates and inflationary pressures.
These 3 REITs did well to increase their dividend payouts, and the feat is even more commendable given that most REITs had to reduce DPUs to keep up.
That said, we look forward to a better year in 2024 as the markets anticipate future rate cuts. (ps, these are the best REITs in Singapore to consider)
Chris Ng, our early retirement masterclass mentor had pointed out that REITs are well-positioned to run in the coming year due to the alignment of various macroeconomic factors.
He will be sharing how he and his students are building their early retirement portfolios in the current markets, you can join him here to learn how.
