2020 was a torrid year for REITs, with the sector being clobbered by the COVID-19 pandemic.
But amid the gloom, five REITs have managed to outperform its peers while delivering double-digit returns to unitholders.
Here are the top five performers for the year.
Note: Share prices have been compiled as of 30 November 2020, and gains are inclusive of distributions.
2020’s star performer is Keppel DC REIT, a pure-play data centre REIT that boasts 18 data centre properties in its portfolio across Asia and Europe.
The pandemic has turbocharged demand for data centres, as many businesses had to accelerate digitalization roadmaps and cloud adoption.
In a business update for the third quarter of 2020, the REIT reported net property income (NPI) of S$62.4 million, an impressive 47.6% year-on-year growth.
The stellar performance is reflected in the REIT’s share price, which has climbed 35.1% in 2020. In addition, nine-month distribution per unit (DPU) was also raised by an eye-catching 16.5%.
The outstanding growth of Keppel DC REIT led to the REIT joining the Straits Times Index (SGX: ^STI) in October, cementing its place as one of Singapore’s blue chips.
The tailwinds that boosted the REIT in 2020 are expected to get stronger, with enterprise spending on cloud infrastructure expected to grow at a 22% compound annual growth rate (CAGR) from now till 2025.
In second place for 2020 is Parkway Life REIT, one of Asia’s largest healthcare REITs.
Its portfolio consists of three private hospitals in Singapore, 48 private nursing homes and one pharmaceutical facility in Japan, as well as a purpose-built medical office building in Malaysia.
In the REIT’s earnings report for the third quarter of 2020, it reported a modest year-on-year revenue growth of 0.8%, while NPI also grew 2%.
The positive results led to increased investor enthusiasm for the REIT.
In line with the good showing, Parkway Life REIT raised DPU by 7.4% in the third quarter.
This increase keeps the REIT on track to maintain its remarkable record of raising DPU every year since its listing in 2007.
Parkway Life REIT also possesses favourable lease structures such as triple net lease arrangements on its Singapore properties, and “up only” rent review provisions for most tenants.
These factors should help the REIT to continue achieving growth in 2021 and beyond.
Next on the list is Frasers Logistics & Commercial Trust, or FLCT.
FLCT has a diverse portfolio that consists of 100 industrial and commercial properties across Singapore, Australia, Germany, the Netherlands and the UK.
Logistics and commercial properties have been spared the brunt of the damage wreaked by the pandemic, while FLCT has also been shielded by its well-diversified portfolio.
No single tenant accounts for more than 4.7% of the REIT’s gross rental income (GRI).
The REIT recently reported an excellent set of earnings for the full fiscal year ended 30 September 2020 (FY2020).
Revenue for the fiscal year surged 53% compared to FY2019, while adjusted NPI increased by 46.2%.
The mega-merger with Frasers Commercial Trust in April, as well as new acquisitions in the year, contributed to the outstanding results.
The growth of e-commerce activities, as well as the “hub-and-spoke” trend, should also boost demand for logistics and suburban office spaces, a positive sign for FLCT.
The fourth-best performer of the year was Mapletree Logistics Trust, otherwise known as MLT.
MLT manages a portfolio of logistics properties located across Asia, with assets under management of S$8.96 billion as of 30 September 2020.
In its most recent quarter, the logistics REIT reported revenue growth of 8.3% year on year, while NPI also improved by 8.9%.
The REIT enjoyed positive rental reversions of 1.5% as it reaped the rewards of accretive acquisitions and asset redevelopments in the previous fiscal year.
The additional contributions whetted MLT’s appetite for more acquisitions, with the REIT announcing a billion-dollar acquisition spree to purchase 24 logistics properties, including 22 in China.
These acquisitions will add greater diversification to the REIT’s portfolio and are set to expand MLT’s regional footprint in China, a fast-growing logistics market in the Asia-Pacific region.
While MLT’s extensive portfolio has shown resilience in 2020 with high occupancy rates, the REIT shared that tenants are cautious on expansion amid global economic uncertainty.
If the situation persists, there might be an oversupply of industrial space that could put on a strain on MLT’s growth.
Rounding up the top five is another REIT within the Mapletree family of REITs: Mapletree Industrial Trust, or MIT.
MIT’s portfolio includes 84 properties in Singapore and 27 in North America, located in industrial estates and business parks.
The properties range from flatted factories and light industrial buildings to stack-up/ramp-up buildings and data centres.
New revenue contribution from its 14 new data centres helped the REIT offset rental reliefs offered to tenants to help them tide through the pandemic.
MIT posted a slight year on year revenue growth of 0.5% for its fiscal first half-year ended 30 September 2020, although DPU fell 4.2% year on year in the same period.
Despite the slight blip, MIT had an enviable track record of growing DPU in the prior 10 years.
The recent acquisitions of Mapletree Redwood Data Centre Trust (MRDCT) and a data centre property in Virginia, USA increases MIT’s exposure to a fast-growing asset class.
With an aggregate leverage ratio of 38.1%, the REIT still has sufficient debt headroom for further investment opportunities, which should help MIT return to growth in the future.
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Disclosure: Herman Ng does not own shares in any of the companies mentioned.