4 Singapore REITs That Could Enjoy Higher DPU in 2024


It is no secret that the REIT sector has endured a tough year in 2023.

The combination of high interest rates, coupled with surging inflation, has dampened sentiment for this asset class.

Income investors should remember that REITs still need to pay out at least 90% of their profits as distributions to enjoy tax benefits.

Hence, REITs will continue to be an attractive asset class to help generate a steady, passive source of income.

We profile four promising Singapore REITs that could enjoy a recovery next year and post higher distribution per unit (DPU) for 2024.

First REIT (SGX: AW9U)

First REIT is a healthcare REIT with a portfolio of 15 properties in Indonesia comprising hospitals, malls, and hotels, 14 nursing homes in Japan, and three nursing homes in Singapore.

The REIT’s assets under management (AUM) stood at S$1.15 billion as of 31 December 2022.

First REIT is supported by strong sponsors in OUE Limited (SGX: LJ3) and OUE Healthcare Limited (SGX: 5WA) with both sponsors having a 44.6% stake in the REIT.

For the first nine months of 2023 (9M 2023), First REIT’s total income rose 0.6% year on year to S$81.4 million.

Net property income (NPI) came in flat year on year at S$79.1 million.

DPU dipped by 6.1% year on year to S$0.0186 because of higher finance costs and the depreciation of operating currencies (IDR and JPY) against the Singapore dollar.

However, in the third quarter of 2023 (3Q 2023), DPU has remained stable quarter on quarter at S$0.0062.

First REIT could see higher DPU in 2024 should interest rates stabilise as the manager continues to divest non-core assets and strengthen the REIT’s capital structure.

Imperial Aryaduta Hotel & Country Club has been identified as non-core and is being marketed for divestment.

Gearing level stood at 39% with nearly 86% of the REIT’s total loans pegged to fixed rates.

With no refinancing requirements until May 2026, First REIT is mitigated against sharp increases in finance costs over the next two years.

Lendlease Global Commercial REIT (SGX: JYEU)

Lendlease Global Commercial REIT, or LREIT, owns an office and retail property (Jem) in Singapore along with a prime retail property 313 Somerset. Its portfolio also contains Sky Complex, three Grade A office buildings in Milan, Italy, as well as a stake in Parkway Parade in Singapore.

For the REIT’s fiscal 2023 (FY2023) ending 30 June 2023, gross revenue more than doubled year on year to S$204.9 million with the full financial contribution from Jem.

NPI also more than doubled year on year to S$153.9 million.

DPU, however, fell by 3.2% year on year to S$0.047 because of higher borrowing costs.

LREIT released its first quarter fiscal 2024 (1Q FY2024) business update that saw a high portfolio committed occupancy of 99.9%.

Its retail rental reversion came in strongly positive at 16.3% and the portfolio had a long weighted average lease expiry of eight years.

Tenant sales were up 4.6% year on year in 1Q FY2024 with a high tenant retention rate of 78.2%.

LREIT has 61% of its debt hedged to fixed rates and has no refinancing requirement till FY2025.

OUE Commercial REIT (SGX: TS0U)

OUE Commercial REIT, or OUECR, is a commercial and hospitality REIT with seven assets in Singapore and Shanghai with an AUM of S$6 billion as of 30 June 2023.

For 9M 2023, OUECR’s revenue rose 22.4% year on year to S$214.6 million while NPI climbed 25.4% year on year to S$178 million.

The REIT manager had completed a successful rebranding of Hilton Orchard Singapore with the completion of an asset enhancement initiative to increase the number of rooms to 1,080.

As a result, revenue per available room (RevPAR) for 3Q 2023 was nearly 60% higher at S$345 compared with 2019.

OUECR’s office segment saw a positive rental reversion of 18.4% for the quarter with a high committed occupancy of 95.7%.

For its retail asset Mandarin Gallery, shopper traffic for 3Q 2023 was at 98% of pre-pandemic levels with tenant sales just 17% below pre-COVID levels.

Rental reversion was a sharp 31.1% for the quarter.

OUECR’s aggregate leverage stood at 39.4% as of 30 September 2023 with 68% of its borrowings on fixed rates and the REIT has no refinancing requirements till 2025.

AIMS APAC REIT (SGX: O5RU)

AIMS APAC REIT, or AAREIT, is an industrial REIT with a portfolio of 28 properties in Singapore (25) and Australia (3) with a total property value of S$2.2 billion.

For the first half of its fiscal 2024 (1H FY2024) ending 30 September 2023, AAREIT’s gross revenue rose 4.4% year on year to S$86.8 million.

NPI increased by 5.1% year on year to S$64.3 million but DPU slipped 1.1% year on year to S$0.0465 because of an enlarged unit base following an equity fundraising exercise.

AAREIT boasts strong operating metrics with a high portfolio occupancy of 98.1% along with a positive rental reversion of 37.7% for 1H FY2024.

Aggregate leverage stood at just 32.1%, opening the REIT to tap on debt for further yield-accretive acquisitions.

77% of its debt is hedged to fixed rates and the REIT has no refinancing commitments for FY2024.

AAREIT also has a diversified and high-quality tenant base with 81.1% of gross rental income from tenants in defensive industries.

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





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