3 REITs Acquiring to Grow in 2021

2021-02-22     thesmartinvestor
3 REITs Acquiring to Grow in 2021

REIT investors have good reason to rejoice.

Low interest rates and an abundance of liquidity have enabled more REITs to conduct yield-accretive acquisitions that help to boost distribution per unit (DPU).

We had already seen this trend last year with several REITs announcing opportunistic acquisitions.

Income-seeking investors can enjoy not just a higher DPU in such instances but also benefit from an enlarged portfolio that emphasizes diversification.

The primary aim of REIT investing is to receive a steady stream of dividends that can pay you for life.

But why not enjoy the best of both worlds?

REITs that grow their portfolios and DPU consistently will give rise to not just a fatter flow of dividends over the years, but will also reward unitholders with steady capital appreciation.

Here are three REITs that announced acquisitions earlier this year.

Ascott Residence Trust (SGX: HMN)

Ascott Residence Trust, or ART, is the largest hospitality trust in Asia Pacific with an asset value of S$7.2 billion as of 31 December 2020.

The REIT’s portfolio consists of 86 properties in 38 cities across 15 countries in Asia Pacific, the US and Europe.

Late last month, ART announced that it will acquire a purpose-built student accommodation asset (PBSA) in the US for US$95 million.

This move was made in tandem with the expansion of ART’s investment strategy to include student accommodation in addition to rental housing and serviced residences.

The property, known as Signature West Midtown, is located in Georgia, Atlanta, and sits on freehold land with a rentable area of around 216,000 square feet.

Average occupancy stands at 95% for the full year of 2020, demonstrating the resilience of this asset class even during the pandemic.

With around 95% of the US student population being domestic, there is also a low chance of the properties remaining unoccupied.

Demand for student accommodation assets is expected to remain robust as vaccinations continue and when international travel eventually resumes.

With the acquisition, unitholders are expected to enjoy a 4.4% increase in DPS based on fiscal 2020’s pro-forma distribution per stapled security.

Mapletree Logistics Trust (SGX: M44U)

Mapletree Logistics Trust, or MLT, is an Asian-focused REIT that invests in a portfolio of logistics real estate assets.

As of 31 December 2020, the REIT’s portfolio consists of 156 properties spread out across countries such as Singapore, Hong Kong, Malaysia, Australia, South Korea, China, Japan and Vietnam, valued at around S$10.2 billion.

Last week, the REIT announced the acquisition of five freehold logistics properties located in Yongin-Icheon, South Korea for around S$334.8 million.

The properties are 100% occupied and have a net lettable area of close to 150,000 square metres.

Tenants include Dongsan Logistics and TE Logis, both of whom are supporting reputable e-commerce players Coupang and eBay Inc (NASDAQ: EBAY), respectively.

The properties are equipped with modern specifications and are well-positioned to capitalise on rising demand for warehouse space as e-commerce adoption accelerates due to the pandemic.

This acquisition follows MLT’s billion-dollar acquisition spree in October last year, and will further diversify the portfolio’s geographic exposure and customer profile.

Management expects the acquisition to be accretive to DPU, though the effect was not quantified.

Debt will be used to fund the acquisition and MLT’s aggregate leverage ratio will rise to 38.9%

This is slightly higher than the 36.8% that the REIT reported in its latest third-quarter earnings.

Ascendas India Trust (SGX: CY6U)

Ascendas India Trust, or AIT, is a REIT that owns income-producing real estate in India.

As of 31 December 2020, AIT’s portfolio comprised seven IT business parks and one logistics park in India, valued at a total of S$2.1 billion.

Last week, the REIT announced the acquisition of aVance 6 located in HITEC City in Hyderabad.

The property, with a total floor area of around 640,000 square feet, was purchased at a consideration of around S$92 million.

Around 98.3% of the property is leased to a unit of Amazon.com (NASDAQ: AMZN).

The vendor, Phoenix Group, had previously sold a total of four buildings to AIT since 2012.

aVance 6 will be the fifth building purchased from Phoenix and the manager is confident it will allow the REIT to scale up its presence in HITEC City.

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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.

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