2023 was an exciting year as interest rates hiked to highs of 525 – 550 basis points. We watched as treasuries and bonds grow in terms of investors’ interest while REITs were the clear losers during 2023 as the cost of debt grew significantly, discouraging aggressive acquisitions during the year. As we enter 2024 with the strong possibility of multiple rate cuts throughout the year, could REITs be an area of interest for investors? In this article, I will share my top 5 exciting REITs to watch in 2024. Without further delay, let’s jump right into this article.
#1 Capitaland China Trust
First on my list of REITs to watch in 2024 is Capitaland China Trust (SGX: AU8U), which has been underperforming in 2023, marking a ~17% loss in 2023. Despite its weak stock performance, the REIT itself has strong growth potential over the long term. With its strong sponsor (Capitaland), coupled with its improved investment mandate back in 2020, they have plenty of acquisition opportunities readily available to them. CLCT can now leverage a much bigger pipeline from its Sponsor, with more than 80 assets that could be pipelined into CLCT just in China alone, not adding in assets that are in Macau and Hong Kong. This definitely presents a huge upside for CLCT in the long run and investors should start taking advantage of it before it runs much higher.
Given that interest rates are quite high now, CLCT is restricted in its acquisition opportunities, which is why the share price has been quite depressed in 2023. This provides investors a good chance to invest before the situation improves, giving CLCT the room to grow and expand. Over the long term, CLCT can definitely climb back to its pre-covid highs of $1.69, and likely surpass this as well. While waiting for CLCT’s share price to recover, investors are paid an attractive yield of approximately 8% – 9%.
#2 Lendlease REIT
Second on my list of REITs to watch in 2024 is Lendlease REIT (SGX: JYEU), which ended 2023 relatively stagnant, after a strong recovery in Q4 in terms of share price thanks to a strong set of Q1 business updates as well as its new lease restructuring announcement. Moving into 2024, investors can expect 2 possible growth opportunities for Lendlease REIT.
Firstly, Lendlease REIT might potentially increase its stake in Parkway Parade from its current 10% interest. This acquisition wouldn’t be too costly for them and would help smoothen the process when they do eventually decide to acquire the asset as a whole, similar to when they acquired JEM. Secondly, Lendlease REIT also has a planned development on 313@Somerset which is expected to take 12 – 18 months to complete. This means we will likely see the effects and impacts of this AEI in 2025.
With these exciting growth opportunities likely coming to fruition by 2025, 2024 seems like an optimal time to start accumulating a position in Lendlease REIT. On top of this, while waiting for these fruits to bear, you are paid an attractive yield of approximately 7% – 8%.
Read my latest analysis: Lendlease REIT Restructures Lease With Sky Italia Before FY2023 Closes! Is It A Good Time To Invest?
#3 Frasers Centrepoint Trust
Third on my list of REITs to watch in 2024 is Frasers Centrepoint Trust (SGX: J69U), which closed 2023 on a positive note, marking a ~8% gain despite a lot of volatility. Although its share price did well, FY2023 was a weaker year for FCT with low growth in its Gross Revenue and NPI as well as a net decrease in DPU due to higher cost of debt.
As we enter 2024, FCT has a few areas of possible growth, namely Asset Enhancement Initiatives (AEIs), acquisitions from its sponsor’s pipeline as well as 3rd parties. As mentioned above, with the cost of debt still high, FCT might utilize 2024 to pare down its debt, increasing its debt headroom for growth opportunities in 2025. This gives investors plenty of opportunities to accumulate a sizable position in FCT before 2025, collecting a respectable 5% – 6% yield while doing so.
Read my latest analysis: Is Frasers Centrepoint Trust A Good Buy Now in 2023?
#4 Parkway Life REIT
Fourth on my list of REITs to watch in 2024 is Parkway Life REIT (SGX: C2PU), which closed 2023 on a rather flat note, marking a ~2% loss. Although its share price was relatively stagnant, FY2023 was a great year for Parkway Life REIT as it posted huge growth in its Gross Revenue and NPI, as well as some growth in its DPU. Its balance sheet remains rock solid as it is being hailed as the most defensive REIT in the Singapore market, being in the healthcare industry.
Coming into 2024, PLife has a huge debt headroom (up to $673.6m) readily available to do acquisitions. As mentioned in an older article here, I talked about the strong possibility that Parkway Life REIT will enter into a new key market. In the recent 1H FY2023 earnings, the management has hinted at the possibility as well.
Investors might want to get in quickly before they announce their next acquisition as it might push PLife up substantially. It is unknown when they will do this but we can definitely expect PLife to enter into this new key market in 2024/2025 as it has been quite a long while since they first mentioned this.
Read my latest analysis: Is Parkway Life REIT A Good Buy Now in 2023?
#5 CDL Hospitality Trust
Last but not least on my list of REITs to watch in 2024 is CDL Hospitality Trust (SGX: J85), which closed 2023 negatively, marking a ~10% loss. It is important to note that CDLHT has experienced a very rocky few years from pre-COVID highs of $1.64 to COVID lows of $0.71, with some recovery in 2022 to highs of $1.34, and then back down to its current $1.12. Despite its weak share price performance in 2023, CDLHT has been recovering well since the pandemic hit.
Coming into 2024, CDLHT has plenty of growth opportunities lined up starting with possible Asset Enhancement Initiatives (AEIs) to continue organically growing its assets. In 2023, CDLHT managed to complete quite a few AEIs which will likely see its impacts in 2024. On top of this, CDLHT has a very strong set of sponsors, Millennium & Copthorne Hotels Limited (“M&C”) and City Developments Limited. Both sponsors are very well known with plenty of high-quality assets which could be bought over by CDL Hospitality Trust.
Despite the attractive growth opportunities mentioned, CDLHT might consider taking a step back and focusing more on paring down its debt and lowering its average cost of debt as it has risen significantly in 2023, from 3.5% in 2022 to 4.2%. This gives investors plenty of time to slowly accumulate a position in CDLHT and get paid a handsome yield of 6% – 7% while waiting.
Read my latest analysis: 3 Important Takeaways From The Q3 Results of CDL Hospitality Trust
Final Thoughts
2023 was definitely a rough year for REITs but 2024 should mark the start of the recovery phase as rates are slowly cut throughout the year. Investors should take note that the recovery might not come all in 2024 and might even extend into 2025 and beyond. As such, it is important to pick the right REITs that have strong management and pay sustainable dividends to their investors while waiting.
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