Uncommon Financial Metrics of REITs

Previously, I've shared bout Basic Financial Metrics of REITs. This time, I would like to share a few uncommon financial metrics that value against distribution. The reason being is, as a REIT investor, ultimately we are focusing on dividend.

In case you ask, I have not done any back test on these metrics.

1) Distribution over Management Fee
Formula: Distribution to Unitholders / (Manager's Base Fee + Performance Fee)

This measure how much dividend received for every dollar of management fee paid, the higher the value the better. You could compare whether a REIT manager is charging a high or reasonable fee for the dividend generated from properties that they manage. Refer below table for top 5 and bottom 5 based on latest 4 quarters:

Top 5 Distribution over Management Fee		Bottom 5 Distribution over Management Fee
Name	Approx. Value	Name	Approx. Value
Cromwell European REIT	20.25	Keppel REIT	3.75
Capitaland Commercial Trust	16.75	Dasin Retail Trust*	4.75
Manulife US REIT	10	Lippo Malls Indonesia Retail Trust	5
Sasseur REIT	10	Mapletree Logistics Trust	5.25
Soilbuild Business Space REIT	10	Ascendas India Trust*	5.5

* Both Dasin Retail Trust & Ascendas India Trust are business trusts

2) Distribution over Capital
Formula: Distribution to Unitholders / (Equity + Debt)
Equity to include net asset value attribute to unitholders + perpetual securities holders + preferred stock holders

This is a modified metrics of  return on capital (ROC), we replace return with distribution. This measure the effectiveness of REIT in using capitals to generate distribution. Refer below table for top 5 and bottom 5 based on latest 4 quarters:

Top 5 Distribution over Capital		Bottom 5 Distribution over Capital
Name	Approx. Value	Name	Approx. Value
Mapletree Industrial Trust	5.5	Dasin Retail Trust*	1.6
Sasseur REIT	5.4	OUE Commercial Trust	2.1
Frasers Logistics & Industrial Trust	5.1	Fortune REIT	2.4
First REIT	5	Keppel REIT	2.5
Keppel DC REIT	4.8	Far East Hospitality Trust	2.9

* Dasin Retail Trust is a business trust

3) Distribution over Gross Income (Distribution Margin)
Formula: Distribution to Unitholders / (Gross Revenue from Properties + Distributions from Associate/Joint Venture + Interest Income + Any Recurring Gain)

This measure the capability of REIT in managing its income and expense. The higher the value, the better the operational efficiency the REIT is. A low figure indicates that either the REIT expenses is high or income is low. This figure would be slightly affected if the REIT retain earning for capital use. It would also affected if REITs choose to receive management fees in units instead of cash. Refer below table for top 5 and bottom 5 based on latest 4 quarters:

Top 5 Distribution Margin		Bottom 5 Distribution Margin
Name	Approx. Value	Name	Approx. Value
OUE Hospitality Trust	70	Lippo Malls Indonesia Retail Trust	25
Parkway Life REIT	70	BHG Retail REIT	27.5
SPH REIT	67.5	Dasin Retail Trust*	30
Far East Hospitality Trust	67.5	Ascott Residence Trust	30
IREIT Global	65	Ascendas Hospitality Trust	35

* Dasin Retail Trust is a business trust

4) Income Support over Distribution

Income support is also known as rental support, it refers to the income that top-up by sponsors or properties seller in the event when actual rental income is lower than desired rental income. Besides rental top-up, income support can also be done through certain shareholders not taking any dividends, in which employed by BHG Retail REIT & Dasin Retail Trust.

BHG Retail REIT

Dasin Retail Trust

I measure income support against distribution to check the % of distribution contributed by income support. Refer below list for counters that have income support:

Income Support / Distribution
Name	Approx. %
Ascendas REIT	13.25% (Est.)
BHG Retail REIT	14.25%
Dasin Retail Trust*	44.25%
Keppel REIT	4.5%
Lippo Mall Indonesia Retail Trust	4%
OUE Commercial Trust	18.25%
Sasseur REIT	18.25% (Est.)

* Dasin Retail Trust is a business trust

Ascendas REIT value is estimated from latest financial statement below, since no detail information on income support, so assume full value as income support:

Sasseur REIT value is estimated from information extracted from IPO prospectus below, took the period of 2018.

If you read through carefully, you would notice the below:
i) Dasin Retail Trust appeared 4 times
ii) Keppel REIT appeared 3 times
iii) Lippo Mall Indonesia Retail Trust appeared 3 times
*Note that this is NOT a buy or sell recommendation.

Again,besides the above uncommon metrics, do check the basic financial metrics, lease profile, debt profile, diversification profile as well. Take note on income support as always. If you want to create a REIT screener, you could always refer to How to Create Your Own Basic REITs Screener.