Two weeks ago, the US Federal Reserve made an important interest rate announcement.

The central bank made its first interest rate cut in four years, reducing the Federal funds rate by 0.5 percentage points to a range of 4.75% to 5%.

Needless to say, this cut came as a huge relief to the REIT sector as many REITs are struggling with sky-high finance costs.

With interest rates poised to go down further, income investors can look forward to higher distributions.

Here are four REITs that could be ready to announce higher distributions in the coming quarters.

IREIT Global SGD

iREIT Global invests in office, retail, and industrial properties in Europe.

Its portfolio comprises five freehold properties in Germany, four in Spain, and 44 retail properties in France.

The REIT pulled off a commendable performance for the first half of 2024 (1H 2024).

Gross revenue jumped 28.8% year on year to €36.6 million, contributed by the newly-acquired retail portfolio in France back in September 2023.

Net property income (NPI) rose 22.8% year on year to €27 million.

Distribution per unit (DPU) inched up 3.2% year on year to €0.0096.

Despite the DPU rise, iREIT Global still reported a hefty 18.3% year-on-year increase in finance costs to €3.7 million.

Should interest rates fall further, the REIT should see its finance costs moderating in future quarters.

iREIT Global’s portfolio occupancy stood high at 89.8% as of 30 June 2024.

The REIT sported an aggregate leverage of 37.2% with a low cost of debt of 1.9%, giving it room to conduct yield-accretive acquisitions by tapping on debt.

The portfolio also enjoyed a positive rental escalation of 5.9% year-to-date with 100% of its rent paid on time, attesting to the quality of the REIT’s tenant base.

Lendlease Reit

Lendlease Global Commercial REIT, or LREIT, invests in a diversified portfolio of real estate assets used for retail and/or office purposes.

Its portfolio consists of Jem and 313@Somerset in Singapore and Sky Complex in Milan which comprises three Grade A office buildings.

The REIT also has a stake in Parkway Parade, a mall in the east of Singapore.

LREIT reported a mixed set of earnings for its fiscal 2024 (FY2024) ending 30 June 2024.

Gross revenue rose 7.8% year on year to S$220.9 million while NPI increased by 7.4% year on year to S$165.3 million.

However, the REIT’s finance costs climbed nearly 28% year on year to S$35.5 million, causing its DPU to tumble by 17.7% year on year to S$0.0387.

Despite the fall, LREIT’s Singapore retail portfolio remained resilient with occupancy close to 100%.

The properties there also achieved a positive rental reversion of 14% with tenant sales edging up 0.2% year on year for FY2024.

For its Milan asset, rental uplift of 1.2% was achieved for Buildings 1 and 2 of Sky Complex while Building 3 is undergoing repositioning to secure higher market rents.

Gearing stood at 40.9% while the weighted average cost of debt shot up from 2.69% in FY2023 to 3.58% in FY2024.

Lower interest rates should help to reduce this cost of debt as the REIT enters FY2025.

Sabana Reit

Sabana REIT owns a diversified portfolio of 18 properties in the high-tech industrial and general industrial sectors.

The REIT’s assets under management (AUM) stood at more than S$1 billion as of 31 December 2023.

Sabana REIT reported a downbeat set of earnings for 1H 2024, weighed down by higher finance expenses.

1H 2024 saw gross revenue dip by 0.2% year on year to S$55.2 million.

NPI stayed constant year on year at S$27.2 million but DPU declined by 16.8% year on year to S$0.0134.

The REIT saw its finance costs surge 37.3% year on year to S$8.8 million.

Sabana REIT continued to report positive rental reversion of 8.8% for its second quarter of 2024, making this its 14th consecutive quarter of positive rental reversion.

However, the REIT’s portfolio occupancy came in at just 78.8% as of 30 June 2024.

Sabana REIT’s aggregate leverage stood at 35.8%, one of the lowest among S-REITs in Singapore.

Its cost of debt stood at 4.3% for 1H 2024, higher than the 3.89% registered a year ago.

ESR-REIT

ESR-LOGOS REIT, or ELR, has a portfolio of 71 properties across Singapore (52), Australia (18), and Japan (1).

Its total AUM stood at approximately S$5 billion as of 30 June 2024.

Like Sabana REIT, ELR also reported a downbeat set of earnings as high finance costs ate into its distributable income.

Gross revenue and NPI fell by 8.1% and 9.2% year on year, respectively, to S$180.9 million and S$127.8 million.

DPU slid 18.6% year on year to S$0.01122.

Borrowing costs jumped nearly 20% year on year to S$32.4 million for the REIT.

ELR recorded a positive rental reversion of 11.2% for 1H 2024 and reported stable occupancy of 91.4% as of 30 June 2024.

The manager is rejuvenating the portfolio through ongoing redevelopments and asset enhancement initiatives (AEIs).

16 Tai Seng Street is undergoing an AEI that will be completed by the first quarter of 2025 and provide a 6% yield on cost.

2 Fishery Port Road in Singapore is also slated for redevelopment into a modern, high-specification ramp-up cold storage facility.

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