In general, industrial REITs such as Sabana REIT have about 15% of its GFA as common areas where costs are borne by the REIT. “We have to sustain these costs and that will eat into the budget, no different from any other REIT,” Han says. “We are mindful that costs are going up. We have to do active property management such as energy audits and look into saving operating costs. It is understandable for landlords to adjust and look into service charge components,” he adds.
Sabana Industrial REIT announced a 7.4% y-o-y increase in distribution per unit (DPU) to 1.59 cents in 1H2022. Gross revenue for 1H2022 rose by 14.7% y-o-y to $44.9 million due to higher portfolio occupancy of 88.2% as Sabana REIT’s manager clinched a healthcare tenant for 30&32 Tuas Avenue 8 with a 10-year master lease. The total amount available for distribution for 1H2022 was $17.1 million, up 9.6% y-o-y. However property expenses rose by almost 33% y-o-y to $17.8 million in 1H2022.
Donald Han, CEO of Sabana REIT’s manager acknowledges that inflationary pressures and the impact on DPU are top of mind of investors whom he meets. “We hedge our electricity costs, and every time it comes to expiry, we have to [re-hedge]. There is a service charge component. Where the buffer is insufficient we increase our service charge. Service charge is the maintenance charge of the property and that component is enough to cover security services, landscaping, cleaning services etc and in some cases electricity,” Han explains.
