The manager of ESR-REIT has reported distribution per unit (DPU) of 0.723 cents for the 1QFY2022 ended March, 9.6% lower than the DPU of 0.8 cents in the corresponding period the year before.
The lower DPU was attributable to the enlarged unit base. In the 1QFY2022, the REIT had a total of 4.05 billion units compared to the 3.59 billion units in the 1QFY2021 due to the equity fund raising comprising a private placement of 268.8 million new ESR-REIT units and a preferential offering of 124.1 million new units in ESR-REIT, which were completed in May and August 2021 respectively.
The DPU will be paid together with the clean-up distribution of 0.187 cents for the period from April 1 to April 22 due to the merger between ESR-REIT and ARA LOGOS Logistics Trust (ALOG).
The merger will be completed on April 28.
The record date for the cumulative distribution was on April 21. Unitholders will receive their distributions on June 23.
Gross revenue during the 1QFY2022 fell 1.2% y-o-y to $59.6 million due mainly to the divestment of 11 Serangoon North Avenue 5 and 3C Toh Guan Road East in the 4QFY2021, as well as the divestment of 28 Senoko Drive and 45 Changi South Avenue 2 in the 1QFY2022.
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Net property income (NPI) plunged 10.4% y-o-y to $39.5 million due to higher utilities expenses on the back of a surge in global energy prices and higher electricity demand.
During the quarter, the distributable amount increased by 2.1% y-o-y to $29.3 million mainly due to lower borrowing costs, contribution from ESR-REIT’s 10% interest in ESR Australia Logistics Partnership (EALP) and income distribution from Viva Industrial Trust.
Net asset value (NAV) per unit fell 1.2% y-o-y to 40.1 cents.
Rental collection for the quarter remains at a healthy 99% of the REIT’s total receivables.
As at March 31, the REIT’s portfolio occupancy rate stood at 91.5%, with a weighted average lease expiry (WALE) of 2.5 years.
During the 1QFY2022, the REIT leased a total of 305,613 sq ft of space comprising 75,836 sq ft (or 24.8%) of new leases and 229,777 sq ft of lease renewals (or 75.2% of total leases). The tenant retention rate in 1QFY2022 was 75.6%.
As at March 31, the REIT’s aggregate leverage stood at 39.5% with 93.3% of its total borrowings on fixed interest rates over the next 1.7 years while the portfolio remains 100% unencumbered.
Looking ahead, the REIT manager expects the industrial leasing market to remain stable with a tight supply pipeline and strong demand. The limited supply in logistics could see demand headed towards the general industrial segment as third-party logistics providers and end-users are actively seeking prime space to meet stronger consumer demand and to ramp up production.
The REIT’s business park segment are also expected to see its leasing challenges ease slightly on the back of the relaxed work from home (WFH) measures.
“While we are encouraged by the steady recovery from the pandemic, the global energy crisis is raising power costs for utilities and coupled with the rising inflation, have increased our utilities and maintenance expenses. Nonetheless, the industrial market is seeing a healthy demand from the logistics and general industrial sectors due to an acute shortage of quality space, and this was reflected in the positive rental reversions recorded for this quarter, continuing the positive trend from last quarter,” says Adrian Chui, CEO of the manager.
“Given the external headwinds, we expect utilities costs to remain high in the near term, impacting net property income. We are keeping a close eye and taking proactive steps to manage these surges in utilities costs and inflationary pressures. For example, we have secured electricity tariff rates with SP Services (which are lower than current pool rates) for tenants who consume large amounts of electricity in their production,” he adds.
Units in ESR-REIT closed flat at 42 cents on April 26.
