SINGAPORE (July 16): Sabana Shari’ah Compliant Industrial REIT (Sabana REIT) has declared 1H20 distribution per unit (DPU) of 0.47 cents, down 65.7% from the 1.37 cents in 1H19.
The manager of the REIT says the sharper decline reflects the one-time capital gains distribution of 0.12 cents or $1.24 million in 1H19.
It has also made the “difficult but prudent” decision to temporarily retain 55% of its distributable income in 1H20 to conserve capital, which will be paid out at a later date.
Had this amount been included, Sabana’s total DPU for 1H20 would have been 1.05 cents.
Gross revenue dipped 6.7% y-o-y to $34.3 million mainly due to lower average occupancies at certain properties and the expiry and termination of master leases at 3A Joo Koon Circle and 10 Changi South Street 2.
Property expenses rose 11.3% y-o-y to $13.4 million on a one-time provision for rental waiver and allowances for impairment losses that were made for certain tenants within the REIT’s portfolio.
Accordingly, net property income (NPI) fell 15.5% y-o-y to $20.9 million on lower revenue, as well as rental waivers and allowances.
Overall occupancy levels rose to 77.4% as at June 30, from 75.4% in Dec 31, 2019 on higher occupancy at 15 Jalan Kilang Barat, and the securing of a new anchor tenant at 3A Joo Koon Circle. An additional 39% of space at 3A Joo Koon Circle was also leased out on a short-term basis.
Rental reversion for 1H20 was a positive 4.4% amid the “challenging backdrop”.
Sabana REIT says it continues to make progress on its targeted asset enhancement initiatives (AEI). In January, refurbishment works were completed at 10 Changi South Street.
It also received approval from the Building and Construction Authority (BCA) to resume construction works for AEI at NTP following the circuit breaker measures. The delay means Phase 1 works are estimated to be completed at 1Q21.
Looking ahead, the REIT says it expects to “face pressure” on its earnings in light of expected negative rental reversion for industrial properties this year.
“We have improved occupancy and achieved positive rental reversion for two straight quarters by executing our strategy of delivering value despite unprecedented challenges from COVID-19,” says Donald Han, CEO of the manager.
“As we emerge from the ‘Circuit Breaker’, we are actively resuming discussions or engaging early with tenants whose leases are expiring this year. Many existing tenants have expressed an interest to renew their leases than to relocate, to minimise relocation-related expenses. We are also pushing on with our targeted AEI and portfolio refresh to provide tenants with the amenities and solutions that they need to navigate the post-COVID world,” he adds.
As at 10.53am, units in Sabana REIT are changing hands flat at 36 cents.
See also: ESR-REIT and Sabana REIT to merge, bringing total assets to $4.1 bil
