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CICT vs FLCT: Which REIT Will Recover Faster When Financing Costs Ease?
The Smart Investorยท2025-11-20 03:30

Core Viewpoint - Financing costs are a significant challenge for Real Estate Investment Trusts (REITs), but declining interest rates could lead to a rally for REITs with strong fundamentals [1] CICT (CapitaLand Integrated Commercial Trust) - CICT reported a strong occupancy rate of 97.2% and year-to-date rental reversions of 7.8% for retail and 6.5% for office properties [2][5] - As of September 30, 2025, CICT's diversified portfolio consists of retail (36.9%), office (33.4%), and integrated development assets (29.8%) contributing to its net property income [3] - The distribution per unit (DPU) for 1H2025 is S$0.0562, reflecting a 3.5% annual increase from S$0.0543 in 1H2024 [3] - CICT benefits from a lower average cost of debt at 3.3%, with 74% of borrowings at fixed rates, allowing for potential refinancing at lower rates [4] - The REIT has a well-structured debt profile, with a maximum of 20% of debt due in 2027 [4][5] FLCT (Frasers Logistics & Commercial Trust) - FLCT reported a DPU of S$0.0595 for FY2025, a decrease of 12.5% from FY2024's DPU of S$0.0680 [6] - The occupancy rate for FLCT is robust at 95.1%, with a positive rental reversion of 5% [6] - FLCT has a better aggregate leverage of 35.7% and an average cost of debt of 3.1% [6] - With 70.4% of borrowings at fixed rates, FLCT is positioned to benefit from refinancing at lower interest rates [7] - The REIT has significant exposure to logistics assets, with 75.1% of its assets in logistics and industrial properties [8] Comparative Analysis - CICT shows a year-on-year DPU growth of 3.5%, while FLCT has a decline of 12.5% [10] - CICT has a higher portfolio occupancy rate of 97.2% compared to FLCT's 95.1% [10] - CICT's average rental reversion is 7.15%, outperforming FLCT's 5% [10] - FLCT has a longer weighted average lease expiry (WALE) of 4.8 years compared to CICT's 3.2 years [10] - CICT primarily focuses on local properties, while FLCT has a more global tenant mix [11] Sector Context - The broader REIT sector is expected to benefit from lower interest rates, which could lead to a general rerating to the upside for both CICT and FLCT [12][14]