Snippets of REITs Symposium 2021

The first day of REITs Symposium saw close to 1,600 online audiences attending the 11 sessions with the REITs and industry experts. With the sell down on Friday, there is strong interest to look at undervalued REITs.

The 2nd part of REITs Symposium, happening on 22 May, will continue to feature engagements with REITs CEO and to tap on the experts’ minds on how REITs can be positioned to ride on megatrends. If you have yet to register, here's the link: https://www.reitsymposium.com/register.html

Below are some highlights shared during the event –

ARA US Hospitality Trust

ARA US Hospitality Trust’s CEO, Mr. Lee Jin Yong, pointed out that the recovery in US domestic travel has really benefited the Trust in terms of overall operations. Furthermore, the successful vaccine rollout and a significant portion of fiscal spending by the US government went to US citizens, which will be positive for the lodging and hospitality segment.

Overall, Mr. Lee sees the worst is behind the Trust. The tremendous amount of pent-up domestic travel demands due to travel delays will start to accelerate. This will be a positive development for the overall hospitality industry.

Cromwell EREIT

Cromwell EREIT’s CEO, Mr. Simon Garing, mentioned that the REIT will continue to keep the distribution payout ratio at 100%, with no intention of cutting it to 90%. The REIT has also kickstarted its distribution reinvestment plan, which saw a strong participation rate from retail unitholders. This will allow the REIT to save part of the distribution income for CAPEX.

In the long run, the REIT intends to increase the portfolio weightage in logistic properties to 50%. The accelerating trend of adopting E-commerce in Europe has resulted in the high demand for these properties. Meanwhile, the pandemic has also accelerated the trend of working from home, structural changes are expected with technological advancement for office assets.

ARA LOGOS Logistics Trust

ARA LOGOS Logistics Trust’s CEO, Ms. Karen Lee, highlighted the logistics sector has remained defensive despite the COVID-19 outbreak. Its tenants which are largely made up of third-party logistics providers in the essential services sector have also continued to operate throughout the pandemic and only a handful have reached out to the Trust for assistance. The overall rental collections have also remained high at over 90%.

For the Trust’s outlook, they continue to be confident in the logistic sectors as there is an elevated demand for warehouse spaces in both Singapore and Australia, due to the strong demand for E-commerce services in both countries.

OUE Commercial REIT

OUE Commercial REIT’s CEO, Ms. Tan Shu Lin, emphasized that the latest tightening of COVID-19 measures in Singapore will have an impact on the commercial segment. The REIT will work with tenants closely to ride out this tough environment. On the other hand, the office segment will only have a minimal impact on the business operations for their office tenants. Meanwhile, the hospitality segment is at its lowest point, but well supported by minimum rental income protection from its master leases.

Moving forward, the REIT expects the Grade A commercial properties to lead the recovery in the office segment in Singapore due to improvement in leasing momentum from family office and tech companies. The hospitality segment continues to be positive as Singapore continues to invest in tourist infrastructure. Hotels are in a good state to ride on the recovery in the long run.

CapitaLand Integrated Commercial Trust

CapitaLand Integrated Commercial Trust’s CEO, Mr. Tony Tan, shared that there will be several synergies from the merger of CapitaLand Mall Trust and CapitaLand Commercial Trust. The 2 main ones include lower interest costs due to the economics of scale and increased portfolio diversification given the different nature of properties.

With regards to the latest tightening COVID-19 measures in Singapore, he also believes that they can tide it through as they are more prepared this time around and the Trust will proactively engage with tenants closely. Lastly, Mr. Tan is also sanguine about how the Trust boasts a huge CapitaStar loyalty programme with over 1.1 million members and will continually work to improve on the offerings in this ecosystem.

Panel Discussion – SREITs: What can investors expect now?

David Kuo: The financial performance of SREITs continues to be resilient despite uncertainty over the economy. During last year’s circuit breaker period, many of the REITs managers have acted socially responsible, by working with tenants to ensure sustainability in terms of tenancy. In the long run, the global economy is recovering, and market liquidity is flourishing, and things will get better in 2022.

Dhruv Arora: SREITs are well known for their stable dividend income to unitholders. Despite that, some investors have mentioned it is tough for them to pick the winning REITs. In the market, one group of investors will pick and invest in individual REITs while another group prefers to have ownership across different REITs. Lastly, in the next 3 to 6 months, normalize condition will be seen in Singapore and recovery will continue for SREITS.

Geoff Howie: Majority of SREITs are showing DPU growth in their latest quarterly updates. One of the strongest performing REIT will be ARA LOGOS Logistics Trust, which has a high occupancy rate of 99%, with strong DPU growth year-on-year. Meanwhile, the resurgence will be a risk for the short term, but the long-term recovery for SREITs remain intact.

Joy Wang: SREITs are showing a broad base recovery and improvement, especially for the industrial sector, which has recorded positive rental reversion. However, the retail sector faces a bit of a speed bump with the latest measures. Moving towards the more positive side, the recovery trend for SREITs will continue for the next 2 to 3 years.

Keppel Capital

Keppel Capital’s CFO, Ms. Ang Sock Cheng, showcased the various REITs under Keppel Capital.

For Keppel REIT, which has assets such as Marina Bay Financial Centre, One Raffles Quay and Ocean Financial Centre, has achieved stability in terms of distribution income to unitholders in the latest quarter. The high portfolio committed occupancy, long WALE and established tenants from diverse sectors will continue to support the REIT’s income resilience.

For Keppel DC REIT, both its topline and bottom line has seen double-digit growth in the latest quarter. The REIT will continue to capitalise on growth opportunities in the data centre industry and strengthen the REIT’s global presence. Also, it will seek to expand its investment mandate to invest in data centre assets as well as other assets to support the digital economy.

For Keppel Infrastructure Trust, which owns a strategic portfolio of businesses and assets in highly defensive and essential industries, has reported stable operating metrics in the latest quarter. Moving forward, the Trust will seek businesses and assets that possess high barriers to entry, potential for growth and are key providers of essential products and services.

For Keppel Pacific Oak US REIT, which has 13 freehold office building and campuses in the US, reported healthy leasing metrics for the latest quarter with rent collection at around 98%. In terms of outlook, the REIT estimated the 12-month rental outlook to moderate down around 3.0% in its key growth markets, slightly better as compared to a negative 3.5% for the overall US market and negative 4.8% for the gateway cities.

First REIT

First REIT’s CEO, Mr. Victor Tan pointed out that the recent restructuring of the master leases for the 14 Indonesian hospitals has allowed the REIT’s rental income to be more sustainable in the long run. Also, the post-restructure will see First REIT receiving rental income in Indonesia Rupiah. In order to manage currency fluctuation, there will be a higher fixed annual rental escalation, to hedge against the fluctuation.

In terms of outlook, First REIT has no refinancing needs until 2022 and the REIT now has debt headroom of S$300 million, which will allow the REIT to conduct accretive acquisitions. Overall, it will be positive for First REIT moving forward with the latest restructuring as rental income will be sustainable in the long term.

Ascendas India Trust

Ascendas India Trust’s CEO, Mr. Sanjeev Dasgupta, mentioned that despite the COVID-19 pandemic, many industries have invested in technology to meet the structural change in consumer’s demand. This in turns benefited its portfolio of tenants that are situated in the IT business park. Also, the geographic spread of their assets in India allows the trust to have strong exposure in India’s IT industry.

Moving forward, the logistics sector in India is going through a growth phase right now as E-commerce is one main driver that causes the demand for these properties to rise in India. The Trust has conducted a forward purchase of a logistics facility in Chennai and is excited about the outlook for logistics and industrial properties in India.

Ascendas REIT

Ascendas REIT’s CEO, Mr. William Tay, pointed out that the REIT can tap on the network of partners and sponsors for the pipeline of properties. Furthermore, given the large base, Ascendas REIT can have a coordinated approach with the Singapore team and the ground team overseas to work together to source and actively manage the deals.

Back in Singapore, with the latest COVID-19 measures, Ascendas REIT will come out with a response plan for the situation. The REIT will also be working with tenants to ensure that they are able to ride out this current difficult business environment. Some of these measures could include rental assistance scheme or rental deferment plan.

Elite Commercial REIT

Elite Commercial REIT’s CEO, Ms. Shaldine Wang, shared that the COVID-19 pandemic and Brexit has not impacted the REIT. Their tenant, which is from different UK government’s ministry, is countercyclical and stable. This has allowed the REIT to collect almost 100% of the rental income, despite the turbulent conditions.

Moving forward, the sponsors for the REIT will continue to help the REIT to acquire properties and will be kept in a private fund until the REIT is ready to purchase from the private fund. The overall direction for the REIT will still be very much focused on government leased assets, as these assets have a stable dividend payout.

Part 2 of REITs Symposium 2021 is happening this Saturday, 22 May where more REITs such as Lendlease Global Commercial REIT, Ascott Residence Trust and Starhill Global REIT will be sharing their outlook. Register for free today: https://rebrand.ly/4475d3