Recent run up in S-Reits price has resulted in average yield falling
below 5% for main staple local Reits like Ascendas, CapitalLand, Keppel, Mapletree and Fraser. Their
share prices have also recovered pretty close to pre-covid level. As most S-Reits have recovered in price way ahead of any improving dividend yield, it is time to look for some offshore US/Euro Reits listed on SGX to boost overall dividend income in my portfolio.
As a dividend income investor, I have increased my investment in the following overseas US/Euro Reits listed on SGX to build a high yield portfolio since the start of the year. Two are from Europe and four from the US. They are selected mainly based on DPU resilience in 2020 and potential upside post covid recovery. The below counters have forward yield of between 7to 8.8% and they have a potential upside of 3 to 28% based on their last 2 years price movement before and after covid. I have invested a total of $136K SGD on the 6 Reits ( including existing stakes in some counters which I have already owned). The current portfolio will yield about $11K of dividend in 2021 based on my yield on cost.
Let look at the individual counter and I explained in a high level why I selected these 6 counters.
1) CromwellReit (EUR)
CromwellReit is a pan-European REIT
with a well-diversified portfolio. Due to its portfolio rebalancing strategy, it will acquire more logistics properties and data centers, as well as
the disposal of some office properties moving forward. Its current price has been depressed at 46cents when it used to average 50 cents and hit a high of 58 cents before covid. In the near term, its stock price has a good chance to increase to low 50s. Therefore, we are anticipating a 10% upside with a 8.8% yield . The latest 2020 FY financial report has also shown CromwellReit to perform better than most S-Reits with similar classification.
Another important consideration is that its sponsor is a large listed property company in Australia with > 10 billion AUM globally.
IREIT Global s a pure office REIT that owns 9 properties in Germany and Spain. IREIT has a high occupancy rate with some of the largest German conglomerates as its tenant providing a very stable income. Its DPU did not drop much despite the pandemic situation in Europe. This counter has been in my portfolio for a few years and my stake was last increased due to a right issue to purchase the Spain property.
Its current price is around 64cents when it used to average 70 cents and hit a high of 80 cents before covid. In the near term, its
stock price has a good chance to increase to low 70s. Therefore, we are anticipating a 10% upside with 7.6% forward yield .
KepPacOakReit is a technology-focused US office REIT with more than 50% of its
portfolio located in the technology hubs of Seattle, Austin, and Denver. Its recent FY financial report showed that it has improved DPU in 2020 despite the severe covid pandemic. This Reit is one of the few listed in SGX to show DPU improvement in 2020. As a result, its share price has recovered very quickly to 73 cents which is just 5 cents shy of its previous average high of 78 cents. With a 8.1% yield, it is one of the highest yield Reits listed.
Keppel Pacific Oak US REIT is jointly-owned by two Sponsors, Keppel Capital Holdings (Keppel Capital) and KBS Pacific Advisors (KPA) which are incorporated in Singapore. Both are reputable sponsors and asset managers in Spore and US respectively.
Manulife US REIT (MUST) is a pure office REIT that owns 9 properties in U.S. Among the 6 offshore Reits I have selected, this is the only one that suffer the most DPU drop but it should have the highest potential upside after covid. Its current price is around 74cents when it used to average 90 cents and hit a peak above $1 before covid. In the near term, its stock price has a good chance to increase to low 90s due to its prime properties in good location. Therefore, we are anticipating a 28% upside with 8% forward yield .
MUST is managed by Manulife US Real Estate Management, a wholly owned company by the Sponsor,
5)Prime USReit (USD)
Prime US Reit focus in stabilised income-producing office and real estate-related assets in the United States. Prime US REIT offers investors a unique exposure to a high-quality portfolio of 11 prime and freehold office properties, strategically located in 9 primary markets in the U.S., with a total Appraised Value of approximately US$1.2 billion. Its recent FY financial report showed that it has improved DPU in 2020 despite the severe covid pandemic. This Reit is another few listed in SGX to show DPU improvement in 2020.Its current price is around 86 cents when it used to average 95cents and hit a peak above $1 before covid. In the near term, its stock price has a good chance to increase to low 90s due to its prime properties in good location. Therefore, we are anticipating a 10% upside with 8% forward yield .
KBS Asia Partners is the sponsor of Prime US REIT. The sponsor’s owners are the founding partners of KBS, one of the largest US commercial real estate managers, with US$11.6 billion worth of AUM. Prime US Reit also counts Keppel, SPH and Temasek holding as major shareholder.
United Hampshire US REIT (UHREIT) invests in Retail and Logistics (self-storage) properties which currently owns 22 properties in U.S. This is another Reit with resilience DPU which is not impacted by Covid pandemic due to essential businesses of grocery and self-storage facilities. Most of its properties are located in the North-east and South-east regions of the USA. 97% of its portfolio is freehold, enjoying a long WALE of 8.4 years which provides certainty to its operating cashflow. Its IPO price of US$0.80 in March 2020- which was also the month the market crashed. At current price of 66 cents with a NAV of 74%, there is a potential >12% upside with a 8% yield.
The Sponsors of UHREIT are UOB Global Capital and Hampshire Companies. UOB Global Capital is the global asset management affiliate of the UOB Group. It has more than 20 years of operating history and manages funds (current AUM of >US$3 billion) from institutional investors. On the other hand, the Hampshire Companies is a family business spanning 3 generations, evolving from a regional manager to a fund manager with more than US$2 billion in assets. It has full real estate capabilities spanning from development to operations, bolstered by strong relationships and network on the ground.
I am a firm advocate of investment portfolio diversification when it comes to picking your own stock. If your portfolio only consist of local S-REITs listed in SGX, you could be missing a lot of gain from overseas markets which have outperformed S-REITs in 2020. The above portfolio provide further geography diversification of my entire investment portfolio and improve my gain by seeking the best return from different markets.