REIT Reporting Period Part 1 - Retail REIT

In general, I am satisfied with the reported performance of the REIT that I owned. I will briefly touch on their performance and my take on them.

FCT - 20171Q
Revenue dropped by 6.4% and net property income dropped by 5.7% but interestingly DPU increased slightly by 0.7%. Read somewhere but can't remember where that this is due to REIT Manager receiving their payments in units instead of cash, hence able to maintain the DPU. NAV remains at $1.93 with gearing of 29.7%.

Next 2 quarters should see a further drop in all metrics as average occupancy rate of Northpoint due to AEI will be about 65% compared to the average of 78% for phase 1 AEI. However, things should look better after that with the expected 9% increase in rental reversion after the AEI.

I am pretty confident that FCT should more or less be able to maintain its 2016 DPU. Even with a drop of 5%, the dividend yield based on my average purchase cost of $2.01 will be around 5.5%. Pretty decent I would say and am sure that the manager will continue to look for way to grow the DPU just like it did over the past decade.

Full presentation by company here.

Starhill Global - 2016/17 2Q
Revenue dropped by 2.8%, net property income dropped by 5.4% and DPU dropped by 4.5%. NAV remains at $0.92 with gearing of 35.2%.

Weaknesses are seen Singapore office space in both Wisma and Ngee Ann, retail space in Wisma, Plaza Arcade redevelopment and of course the drag by Renhe Spring Zongbei Property performance.

I think SG Reit will continue to be affected by the weakness in Singapore office space and redevelopment of Plaza Arcade for the rest of the year. It is good that they have resolved the issue of Renhe Spring Zongbei Property. Assuming the continue drop in DPU widen and 2017 payout reduced by 10%, my purchase yield is still about 7% and based on current price of $0.75, yield is about 6.2%. Again, pretty decent but unsure if payout will continue to trend downwards.

Full presentation by company here.

CMT - 2016
Revenue increased by 3.1%, net property income increased by 2.9% but DPU dropped by 1.1%. NAV remains at $1.86 with gearing of 34.8%.

There isn't much catalyst or concern in near term. I expect CMT to continue to sustain its dividend. Funan redevelopment will only be completed in 2019 and that should boost its DPU then.

Full presentation by company here.

My Thinking and Action
Unlike the past decade, growth of retail reit is slowing down. I think it will be able to sustain its dividend but I do not expect much growth. While e-commerce is a concern, I think retail space is still necessary and I do not foresee a huge drop in occupancy rate soon.

With purchase of FCT and CMT over the past few months, I am a tad overexpose in retail reit and am looking to trim some holdings from Starhill Global. While it offers me the greatest yield, I am more attracted to the stability of FCT and CMT at this moment. Among the 3 REIT, current favourite is FCT with its lowest gearing. I am hopeful that its Northpoint AEI will boost its return and would love to have Waterfront Point to be inserted to its portfolio soon.