If you love yields, you
should consider industrial REITs.
Industrial REITs,
typically give the highest yields relative to the other type of REITs. This is
because of a few reasons
1) Industrial REITs
enjoy low property upkeep and repair expense
2) Capital Gains have
already been priced into the yields, due to their low remaining land lease
years
3) Singapore Government
long term objective is to lower the cost of doing business in the country, as
such there will always be problems of oversupply of industrial properties-
typically flatten factories and light industrial
But if you don't mind the
reasons above, here are 3 top Singapore listed industrial REITs, i would
suggest looking into. (My opinion)
Ascendas REITs
Good points
+ Largest business
and industrial REIT listed on the Singapore Exchange
+ Part of the FTSE
Straits Times Index
+ Well Diversified
+Properties are
located in two countries, Singapore (103 properties) and
Australia (29 properties)
+Ascendas REIT’s
tenants come from more than 20 industries and there’s no industry which makes
up more than 10.8% of its gross revenue
+Has more than 1300
tenants
+ Most of their
Singapore Industrial properties are located near major expressways, seaports
and near the airport
+ Their Australia
industrial properties are located near major transport infrastructure
+ Have a track
record of divesting properties at a profit.
Example:
Divestment of the
property to Sengkang Import & Export at profit of $S7.28million (Original
price $S12m)
Divestment of
A-REIT City@Jinqiao business park property in Shangha at a profit of $S99.3m
+ Healthy balance
sheet, total gearing level is about 34%. Have room to grow ($2.1billion to
reach 45% gearing limit)
+Management is only
paid performance fees is there is growth of at least 2.5% in DPU
Points
to be concerned
-Although occupancy
has improved slightly. Ascenads REIT’s total occupancy rate is only 90.2% (Dec
2016) indicating that nearly 10% of its portfolio is not occupied by tenants.
-Average debt
maturity is 3.3 years only. Most of the debt will be refinanced in 2017-2020;
given raising interest rates, debts could be refinanced at higher cost
-Portfolio weighted
average lease to expiry (WALE) is 4.3 years. About 64.5% of lease expiries are
up for renewal between FY17 to FY22. Lease renewals gives tenants the
opportunity to negotiate rentals. Lower rentals equate to lower future DPUs
Mapletree
Logistics Trust (MLT)
Good points
+ Properties are
even more diversified (in terms of Geography) for MLT. Based on revenue 42.2%
comes from Singapore, 15% from Hong Kong, 18.3% from Japan, 9.2% from South
Korea, 7.8% from China with Australia, Malaysia, Vietnam making the rest of the
portfolio
+127 properties as
at 31st March 2017
+Portfolio
occupancy 96.3% March 2017. Very high as compared to industry standards
+ Regarding
investment returns. MLT has an Impressive track record. Steady growing revenue,
net property income, DPU since FY2011
+Divestment wise,
similar to Ascendas REIT, MLT does divestment with gains between $2m to $8m
+Have been scaling
up presence in countries like South Korea, Vietnam and most recently in
Australia. Added 8 properties in Australia (Sydney; Victoria) , 1 property in
Malaysia, 1 in Vietnam
+Special mention
about their Australia properties, their WALE by revenue is 5.5 years to 6.4 years,
much higher than the typical WALEs for Singapore industrial properties
+Maintained a well-staggered debt maturity profile with weighted
average debt duration increased to 3.9 years from 3.5 years
Points to be
concerned
-21.4% of leases
are expiring in FY18/19
-15.3% of leases
are expiring in FY19/20
Mapletree
Industrial Trust (MIT)
Good points
+ 86 properties,
many of which are close to public transportation networks and near established
industrial estates
+Distributable
income and DPU remains strong and are increasing
+ Occupancy remains
at 93.1%, better than Ascendas, relatively comparable to MLT
+Debt maturity
profile, average tenor is 3.5 years. 30.2% of debts will be refinanced in
FY19/20
+All the mapletree
related reits have proactive managers and proactive strategies in place, such
that they are able to optimise returns through divestment and redevelopments.
Example
Selling away 65
Tech Park Crescent for a profit of $S4.4m
Points to be
concerned
- Only focused on
industrial properties in Singapore
- 41.4% are flatted
factories , only 15.1% are business park buildings
-Currently there an
oversupply for flatted factories in Singapore and demand for factory space has weakened
-Portfolio WALE is
only 3.1 years, lower than MLT and Ascendas
-More than 65% of
leases will be expiring in the coming 3 years, this will give raise to the
risks of renewing rentals at a lower rate
