SINGAPORE (July 16): The manager of ESR-REIT has reported a distribution per unit (DPU) of 1.162 cents for 1H20 ended June, which is 42.2% lower than the DPU of 2.011 cents a year ago.
The lower DPU was mainly attributable to the impact of the Covid-19 outbreak and the circuit breaker measures imposed from April to June.
The total distributable income to unitholders amounts to some $40.8 million after the REIT says it has decided to retain about $7.0 million in 1Q20 for “prudent cash flow management”.
Should the total distributable income of $47.8 million be distributed to unitholders, the DPU for the half year would have stood at 1.359 cents.
Gross revenue for 1H20 before the Covid-19 rental rebates fell 7.9% y-o-y to $118.4 million, while net property income (NPI) fell 16.8% y-o-y to $80.2 million.
Some $4.6 million were distributed as part of Covid-19 rental rebates.
The decline in revenue was largely attributable to lease conversions from single to multi-tenancy leases for seven properties across FY19 and 1H20, non-renewals and downsizing by certain tenants, as well as rental rebates set aside for tenants.
Property expenses increased 4.2% y-o-y to $33.5 million on added land rent, property tax, and maintenance fees arising from the lease conversions from single to multi-tenancy leases.
As at June 30, ESR-REIT says its portfolio occupancy increased to 91.1% in 1Q20, above JTC’s average of 89.2%.
The total number of leases signed in 1H20 stood at about 1.95 million sqft, of which, 49 were new. The new leases accounts for 60.8% – or 1.18 million sqft – of the total area secured.
Year-to-date, the tenant retention rate stood at 85.7% as at end June.
The REIT’s portfolio has a weighted average lease expiry (WALE) of 3.4 years as at June 30 this year.
The manager of the REIT has also successfully reduced rental income exposure to Hyflux Membrane to 1.6% from 2.8% on a portfolio basis by securing two new sub-leases at 8 Tuas South Lane.
As at June 30, the REIT has committed undrawn revolving credit facilities of $110.0 million, and a debt headroom of $501.0 million. Cash and cash equivalents stood at $21.1 million as at end June.
In its outlook statement, the REIT says demand in the logistics sector is increasing despite looming “economic headwinds” and as industrialists become more risk adverse and cautious about space requirements post-circuit breaker.
Leasing activities have also seen an increase in enquiries for space in the high-specs industrial sector as industrialists review their global manufacturing supply chain locations amidst increasing US-China trade and political tensions. Prices and rentals of industrial space are likely to remain muted with pressure on rental reversions expected due to cautious industrialists’ sentiments.
Over half of ESR-REIT’s tenants were classified as essential service providers, and were operational during the circuit breaker period.
The REIT says that the extent of the impact of Covid-19 on its financial performance cannot be determined at this point.
“While challenges remain in the operating environment, our cash position remains stable with no refinancing needs until June 2021,” says Adrian Chui, CEO and executive director of the manager.
“At the same time, we are seeing value opportunities for us to continue our growth and diversification strategies to protect and enhance our portfolio and long-term value for our unitholders. Our focus is operational excellence and portfolio resilience to ensure that our stakeholders overcome this challenging period while continuing to pursue our long-term sustainable growth strategies,” he adds.
Units in ESR-REIT closed flat at 39 cents on Wednesday.
See also: ESR-REIT and Sabana REIT to merge, bringing total assets to $4.1 bil
