Hello savvy investors, welcome back to ‘The Dividend Uncle’! Today, we’re diving into one of my quarterly updates on REITs to buy or avoid. But before we get into the details, I want to make something clear. This video is different from my usual long-term analysis videos. The recommendations I’ll be sharing today are based on a shorter-term perspective, specifically for the next three months or so.

Now, you might be wondering, why the distinction? Well, in my regular videos, I focus on long-term investment strategies, looking at REITs that are solid for the years ahead, regardless of temporary market conditions. But in this quarterly series, I take a more tactical approach, considering short-term factors that could impact performance over the next quarter. This could include market sentiment, interest rate trends, or even sector-specific news.

So if you’re looking for some quick plays to make the most of the current market environment, this is the post for you. If you’re more of a long-term investor, feel free to check out my other posts and videos on my YouTube channel for insights on building a resilient portfolio over the years.

Before we dive in, I must let you know that this content is for informational and educational purposes only and does not constitute financial advice. The opinions expressed are based on publicly available information and personal analysis, and they are not tailored to your specific financial situation. The REITs and institutions mentioned are cited purely as examples. While I have no affiliations, sponsorships, or financial relationships with any of them, I may personally hold positions in some of the investments discussed. Before making any investment decisions, you are strongly encouraged to consult a licensed financial adviser.

Alright, with that said, let’s get into it!

Digital Core REIT: Positioned for a Strong Rebound

First on the list of REITs I’m buying is Digital Core REIT. Now, I know some of you might have had concerns about this REIT in the past, especially after the bankruptcy of one of its major tenants, Cxytera. But here’s the thing: Digital Core REIT has moved past those issues, and the market is taking notice.

The demand for digital centers across the globe is growing rapidly, and this is driving growth for Digital Core REIT. We’re seeing the positive impact of their new acquisitions, particularly in Frankfurt, where occupancy skyrocketed from a mere 6.3% to an impressive 98.5%, coupled with positive rental reversion. This is not just a one-off; it’s a sign that the REIT is on the right track. Plus, Digital Core REIT has the option to acquire more of the Frankfurt property from its parent at the right time, which could drive even more growth down the line.

Now, I won’t sugarcoat it; there are two leases in LA, US, that are set to expire on September 30th. But here’s the silver lining: analysts are expecting strong positive rental reversions of up to 80%, thanks to the robust demand in the market. This could be a significant boost for Digital Core REIT as it continues to strengthen its portfolio.

So, if you’re looking for a REIT that has overcome its past challenges and is well-positioned for growth in the near term, Digital Core REIT is definitely one to consider.

Keppel Pacific Oak US REIT: A Wild Card that Paid Off Big Time

Next up is Keppel Pacific Oak US REIT. If you’ve been following ‘The Dividend Uncle’, you might remember that about 5 weeks ago, I highlighted Keppel Pacific Oak US REIT as a “wild card” pick. Back then, I mentioned that the expectation of declining interest rates in the US was likely to boost sentiment for this REIT as it seemed undervalued.

Well, guess what? Since then, the REIT’s price has surged by more than 70%! Talk about a timely pick, and I hope you have benefited as well!

Now, just to refresh your memory – the halt in dividends until end of 2025 wasn’t due to poor performance. It was a precautionary measure to retain earnings, pay down debt, and lower the gearing ratio to ensure it wouldn’t surge if property valuations dropped. This move surprised many investors because the REIT was actually doing well, and capital multiples were still healthy.

Here’s why I believe Keppel Pacific Oak US REIT could still outperform in the coming months: with interest rates expected to decline, there’s a chance the REIT might restart dividend distributions earlier than anticipated, and when they do, we could see higher payouts as well.

Even though the price has jumped quite a bit, it’s important to remember that it dropped from around $0.38 to as low as $0.12. Even after recovering to about $0.24, it’s still some way off from where it was before the dividend halt. With a price-to-net-asset-value ratio of 0.34 and decent operational performance—like a positive rental reversion of 1.2%, an improvement from negative 1.4% the previous quarter, and an occupancy rate that’s risen to 90.7% from 90.1% despite the challenging US office market, I still find the current price attractive enough to continue buying for the next few months.

So, while it might have been a wild card pick back then, Keppel Pacific Oak US REIT is proving that sometimes taking calculated risks can really pay off.

Alright, before we move on to the final REIT to buy and one to avoid, here’s the deal: If you’re enjoying this post and finding value in the insights I’m sharing, please give it a thumbs up! Your support really helps to grow this community, and it motivates me to keep bringing you the best REITs and dividend content in Singapore.

Manulife US REIT: Catching-up Opportunity

And now, for the third and final REIT on my list—Manulife US REIT. I know some of you might be feeling a bit more apprehensive about this one, and I completely understand. But let’s not forget the old saying, “When the tide comes in, all the boats are lifted together.”

While Manulife US REIT’s operational performance may not be as strong as Keppel Pacific Oak US REIT, its occupancy rate is sitting at 78.4%, compared to Keppel’s 90.7%, and its gearing is higher at 60.0%, compared to Keppel’s 42.7%, there’s something important going on behind the scenes. The restructuring of Manulife US REIT is strongly supported by its parent company, which has committed significant expertise to the board and management team. This support is crucial as the REIT moves forward with its disposal mandate, which aims to sell several properties to lower its debt level.

Now, here’s where the tactical opportunity comes in. With the heightened expectation of interest rate cuts in the US, Keppel Pacific Oak US REIT has surged by more than 70%. But Manulife US REIT? It’s only gone up by less than 20%. Both REITs started off with similar price-to-net-asset-value ratios of less than 0.2, yet Keppel’s has now risen to 0.34, while Manulife’s has only climbed to 0.26. This substantial gap means that I’m fairly confident Manulife US REIT will catch up to a certain extent.

In short, while this pick might not be for everyone, I see it as another tactical opportunity. Sometimes, the market just needs a little time to realize the value, and when it does, you’ll be glad you got in early.

One REIT to Avoid: iREIT Global

Now, let’s turn to the REIT that I’m avoiding, iREIT Global. Before I dive into the details, let me clarify: I’ve invested in iREIT Global myself, and I’m holding onto my investment. The long-term thesis for iREIT Global still looks reasonably solid, and their latest financial results show they’re on the path to recovery. The benefits from the acquisition of the B&M portfolio in France are starting to come through, with distribution per unit up by 3.2% and a positive rental reversion of 5.9%. On top of that, their interest rate has remained impressively low at 1.9%, thanks to their debt being almost fully hedged.

But, despite these positives, there’s one significant risk on the horizon that has made me hit the pause button when it comes to committing any new money to iREIT Global. This risk stems from the well-known situation at the Berlin Campus, where the only tenant is planning to leave. The management has announced that they will reposition the property into a multi-let, mixed-use asset once it’s vacated, and they’re reportedly in “advanced stages” of entering into 20-year lease agreements with two hospitality operators covering around 9,500 square meters each. Additionally, they expect to conclude another lease agreement with a government agency for about 4,000 square meters of office space. If these leases are secured, over 28% of the property would be pre-let.

While this is indeed encouraging and could significantly boost iREIT Global’s revenue-generating capabilities and diversify its tenant base in the long run, the short-term risks are clear. Beyond the usual construction delay risks, there’s also the challenge of filling up the remaining space at attractive rental rates. Until I see further concrete progress in the leasing status in the huge property repositioning, I’ll be holding off on adding any new investments into iREIT Global.

So there you have it, my tactical investments for the next few months: 3 REITs to buy and 1 to avoid. Although my original plan wasn’t to focus on overseas REITs for this analysis, it turns out that the top short-term opportunities I’ve identified happen to be in the overseas REITs category. But remember, these ideas are based on current market conditions and are meant for short-term strategies. If you’re in it for the long haul, be sure to check out my other posts and videos where I dive into REITs with strong long-term potential.

See you in the next post, and in the meantime, happy investing!