The S&P/ASX 300 Index (ASX: XKO) real estate investment trust (REIT) sector has taken a beating in the last year and a half. Despite today's impressive rise for ASX property shares, I still believe they are impressive options for passive income.
The commercial property sector has fallen hard since the first half of 2022 following all of the interest rate rises.
With the inflation picture continuing to improve in the US, bond yields have lowered and this makes commercial property comparatively more attractive. They're still down a lot though, so I'd call them opportunities for passive income.
Centuria Industrial REIT (ASX: CIP)
This REIT is focused on industrial properties in metropolitan areas. There's a shortage of distribution and logistics facilities in the cities and it's not like there's an abundance of empty space within Sydney, Melbourne to use.
In the ASX 300 REIT's latest quarterly update for the three months to September 2023, it said it saw the rent with renewed leases increase by 48% compared to the prior rent. That's a big boost for the rental earnings and it supports the property values, with the portfolio occupancy rate at 98.6%.
The business is expecting to pay a passive income distribution of 16 cents per security in FY24, which translates into a distribution yield of 5.2%.
It's still down more than 20% from April 2022, yet is experiencing all of this strong rental growth. I think it looks attractive on a long-term basis.
Rural Funds Group (ASX: RFF)
Rural Funds is an ASX 300 REIT that is focused on farmland, with a presence in cattle, almonds, macadamias, vineyards and cropping.
A substantial portion of the rental contracts have increases linked to inflation, so it's benefiting from the strong CPI numbers we've seen. Another third of the income largely sees fixed increases every year, plus an occasional market review.
It has a long weighted average lease expiry (WALE) of 13.9 years, which means it has a lot of future revenue locked in.
The business pays a distribution quarterly, so investors can get regular cash flow from this business. It's investing in its farms which can help increase the payouts in future years.
In terms of the passive income yield, it's expecting to pay an annual distribution of 11.73 cents per security in FY24, which translates into a forward yield of 6.4%.
The Rural Funds share price is down close to 40% from April 2022.
Charter Hall Long WALE REIT (ASX: CLW)
This ASX 300 REIT owns a variety of different properties, including services stations, Bunnings buildings, high-quality retail properties, distribution and logistics, offices with blue-chip tenants, food manufacturing, waste and recycling management and so on.
It had a WALE of around 11 years at June 2023, which means the business has plenty of long-term income security.
Some of the rental income is linked to inflation, and it's seeing fixed increases each year for other properties. The rental income growth can offset some of the interest rate pain.
In FY24 it's expecting to pay an annual distribution per unit of 26 cents, which translates into a forward yield of 7.4%.