Out of the 40+ S-REITs, there are only 3 SGX-listed European REITs:

• Cromwell European REIT
• Elite Commercial REIT
• IReit Global

Hence, in this article, we will go through the 3 European REITs share price performance as well as their financial metrics.

The FTSE REIT index has risen about 0.22% YTD but fallen about 13.96% in the past 1 year. However, a quick look at all the European based SGX listed REITs show that they have taken a worse beating than the index.

The only exception is Cromwell European REIT which has outperform the REIT index YTD.

1. Elite Commercial REIT

Elite Commercial REIT owns properties in the United Kingdom. The REIT’s portfolio comprises 155 freehold office buildings located across the UK with an aggregate value of £466.2 million.

The REIT derives most of its rental income from the UK Government with a long weighted average lease expiry of 4.8 years.

It has a stable occupancy of 97.9% and has a consistent rent collection in advance.

However, the share price still perform badly compared to the other two European REITs. The reasons could be due to:

• High gearing ratio of 45.8%
• DPU decline
• Weak UK economy thus resulting in lower property valuation and NAV as seen from from the table below

With the implosion of Credit Suisse, could we see a further decline in the valuation of the UK properties?

2. IReit Global

IREIT’s portfolio comprises 5 freehold office properties in Germany, 5 freehold office properties in Spain and 27 freehold retail properties in France.

The portfolio has a total lettable area of approximately 384,000 sqm, an overall occupancy rate of approximately 88.3% and a valuation of approximately €1.0 billion.

Ireit Global share price has fallen 2.94% YTD . However it has fallen over 21% for the past one year.

Although the gearing is still relatively low at 32%, the DPU dropped from 2.93 Euro cents to 2.69 Euro Cents.

The portfolio occupancy has also decreased to 88.3% as at 31 Dec 2022 from 95.7% as at 31 Dec 2021 due to Darmstadt Campus being vacant as a result of the departure of its sole tenant, Deutsche Telekom and thus impacting its DPU.

From the table below, we can see that though the net property income has increased, the income available for distribution dropped sharply due to higher operating expenses. Could this higher expenses be a concern going forward?

Another reason for the fall in share price could be the drop in NAV due mainly to the falling EURO against SGD.

With the European economy not in a good shape, we need to monitor the valuation of the properties closely.

3. Cromwell European REIT

Cromwell European REIT (CEREIT) currently owns light industrial / logistics properties as well as office assets in gateway cities across Europe.

CEREIT’s  portfolio comprises 110+ predominantly freehold properties in or close to major gateway cities in the Netherlands, Italy, France, Poland, Germany, Finland, Denmark, Slovakia, the Czech Republic and the United Kingdom with approximately 800+ tenant-customers.

CEREIT reported a decent set of results for the year ended 31 Dec 2022 where the net property income is up 5.1% to EURO136.8 million while DPU is up 1.3% to EURO 17.189 Euro cents.

It also has a strong positive rental reversion of 5.7% and its occupancy rate reached a record high of 96.0%.

This is probably why CEREIT share price has perform relatively well YTD and could be the outperformer among the SGX listed European REITs.

However, investors need to take note the NAV dropped from EUR2.52 to EUR2.42 and the gearing is relatively high at 39.4%.

Conclusion

From the above summary/comparison on the SGX listed European REITs, we could roughly gauge the factors affect REITs’ share price performance:

• DPU growth – a key factor to look out for before buying  a REIT
• Macro economic trends of the countries where the REITs properties are located which will affect the property valuation.
• Nature of the properties – CEREIT properties are mainly in logistics and industrial properties which could be more resilient to economic shocks compared to office properties.
• NAV and freehold properties should not be the main factor in determining whether to buy the REIT if the DPU keeps falling.
• Currency exchange rate against SGD. If the SGD strengthen, the dividends paid to you could be affected.
• Operating/I/R expenses of the REIT which will impact the income for distribution

For more information, you can also check out the 3 European REITs websites: Elite Commercial REIT, Ireit Global and CEREIT.