4 REITs that are primed to grow

The turbulence experienced in the stock market this year has led many investors to wonder if it still makes sense to invest in the stock market.

After all, volatility has remained elevated and pessimism continues to reign as Covid-19 remains untamed.

Yet, some businesses have managed to display resilience and adaptability as their operations have not been adversely impacted by this crisis.

REITs have been similarly hit across the board, but some have managed to pick themselves back up.

In an era of low-interest rates, many REITs have conducted acquisitions to boost their distribution per unit (DPU) and increase their exposure to attractive regions.

Here are four REITs that are poised to grow over time due to recent acquisitions.

1. Mapletree Industrial Trust

Mapletree Industrial Trust, or MIT, invests in a portfolio of industrial properties in Singapore and North America.

MIT’s portfolio comprises 84 properties in Singapore and 27 properties in the US, with total assets under management (AUM) at $6.6 billion as of Sept 30, 2020.

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The REIT has conducted two acquisitions in the last four months, the first being the acquisition of the remaining 60 per cent interest in 14 data centres located in the US back in June.

The second, announced in September, was for a data centre and office property in Virginia, USA.

These acquisitions should increase the resilience of the REIT and also bump up DPU for unitholders.

2. Elite Commercial REIT

Elite Commercial REIT is a recently-listed REIT that owns a portfolio of commercial assets located in the UK.

The REIT owns a portfolio of 97 properties located across the UK. These properties are anchored by a stable tenant, the Department for Work and Pensions (DWP), the UK’s largest public service department.

Elite recently announced the acquisition of 58 commercial properties, also in the UK, to add on to its initial IPO portfolio.

This acquisition will allow the REIT to gain exposure to London and also increase pro-forma DPU by 3.2 per cent.

3. Suntec REIT 

Suntec REIT owns a mix of commercial and retail properties in both Singapore and Australia.

The REIT has been listed since December 2004 and has paid out consistent distributions in the last 15 years.

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Last month, Suntec announced its first foray into the UK with the acquisition of a 50 per cent stake in the Nova properties for GBP 430.6 million.

Not only is this transaction DPU-accretive, but it also opens up the REIT to a new country and helps to further diversify its portfolio.

4. Ascendas REIT

Ascendas REIT is Singapore’s first and largest industrial and business space REIT, with a portfolio consisting of 197 properties worth $12.8 billion as of June 30, 2020.

The REIT sits under CapitaLand Limited ‘s stable of REITs and boasts a list of reputable companies such as Singtel, DBS Group Holdings Ltd and Citibank as major tenants.

In late September, the REIT added to its growing stable of properties with the acquisition of a suburban office in Sydney’s Macquarie Park.

The transaction was both DPU-accretive and helped to further diversify the REIT’s exposure to suburban office property.

Get smart: Anchored by strong sponsors

These acquisitions have one thing in common: the presence of a strong sponsor for each of the REITs.

Suntec REIT has ARA Asset Management (“ARA”) as a sponsor. ARA has around $110 billion worth of gross assets as of June 30, 2020.

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MIT’s sponsor is Mapletree Investments Pte Ltd (MIPL), which manages four Singapore REITs and six private equity real estate funds. MIPL owns and manages a total of $60.5 billion worth of real estate assets as of March 31, 2020.

Ascendas REIT has a reputable sponsor in CapitaLand, while Elite Commercial REIT’s sponsor, Elite Partners Capital, manages more than $1 billion of assets.

This article was first published in The Smart Investor. Disclaimer: Royston Yang owns shares in Suntec REIT and DBS Group Holdings Ltd.