The manager of Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (Sabana REIT) has posted distribution per unit (DPU) of 1.48 cents for the 1HFY2021 ended June, 214.9% higher than DPU of 0.47 cent posted in the 1HFY2020.
The surge in DPU was partly attributable to the 55% retention of the REIT’s distributable income in the 1HFY2020.
Had the amount been included, y-o-y DPU growth for the 1HFY2021 would have been 40.9%, from the 1.05 cents in the 1HFY2020.
1HFY2021 gross revenue increased by 14.1% y-o-y to $39.1 million, mainly due to higher contribution from New Tech Park (NTP), 23 Serangoon North Avenue 5 and 10 Changi South Street 2 on higher occupancy.
Net property income (NPI) for the half-year period rose by 23.2% y-o-y to $25.7 million on the back of the higher revenue.
Income available for distribution in the 1HFY2021 rose 41.2% y-o-y to $15.6 million.
As at June 30, the REIT reported overall occupancy levels of 83.4%, up by 6.1 percentage points y-o-y and 6.9 percentage points q-o-q.
Weighted average lease expiry (WALE) as at June 30 stood at 2.8 years, with 75.8% of leases expiring in 2021 renewed or replaced by new leases.
This is due to improved occupancies across NTP+ and other properties like 23 Serangoon North Avenue 5 and 10 Changi South Street 2.
See also: Sabana REIT posts portfolio occupancy of 79.0%, 96.7% occupancy for NTP+ in 1Q update
The REIT’s occupancy rate would have been at 86.4% if not for the divestment of 1 Tuas Avenue 4.
Rental reversion was a positive 11.8% for the 1HFY2021 amid heightened alert restrictions imposed in May.
Removal of Shari’ah compliance requirement
Looking forward, the REIT says it will remove its Shari’ah compliance requirement to cater to the changing profile of its tenants.
As at March 31, the manager revealed that the percentage of unitholdings held by the REIT’s Shari’ah investors have dipped to 2% from 12.3% as at Dec 31, 2011.
The removal, which was based on feedback from its unitholders, as well as feasibility studies and strategic analysis of growth opportunities, will enhance flexibility for the REIT’s next phase of growth, it says.
The removal does not require further approval from unitholders.
Calling the Shari’ah compliance requirement an “invaluable” one, the manager says the removal of the compliance will see potential cost savings in the long-run.
In the immediate term, the removal will bring the REIT access to more diversified funding sources and will better position the REIT to drive value-accretive acquisitions and organic growth.
It will also allow the REIT more flexibility to execute its refreshed strategy through exposure to a larger pool of tenants.
The removal of the Shari’ah compliance will be effective on or around Oct 21.
“Having said this, we are exploring options to remain a viable investment for Shari’ah investors and to potentially remain on relevant indices,” says the manager.
Facility agreement
In its outlook statement, the manager of the REIT announced that it had entered into a facility agreement with UOB for up to $225.0 million in unsecured loans.
The sum will go towards refinancing most of its debt and for general corporate and working capital requirements.
The move is expected to lengthen the weighted average debt expiry. The next financing will be in 2024.
Distribution reinvestment plan
The REIT says it will be moving ahead with its distribution reinvestment plan where unitholders can increase their unitholdings in the REIT at a discount to the volume weighted average price (VWAP) per unit.
“This will strengthen Sabana REIT’s working capital reserves, conserve cash from operations, and provide financial flexibility (with more cash retained),” says the manager.
In addition, on June 2, the manager of the REIT appointed Chan Wai Kheong as independent director.
For more stories about where the money flows, click here for our Capital section
The appointment of Chan, a Singapore-based hedge fund manager, was initially proposed by Quarz Capital, who have objected to his appointment as director.
Read the full story here.
The manager says it remains “cautious” amid the recovery in Singapore’s economy due to the “challenging” macroeconomic landscape with “various unknowns in living with Covid-19”.
On the 1HFY2021 results, Donald Han, CEO of the manager says, “We are seeing the fruits of our labour from the disciplined execution of our refreshed strategy over the past three years. Despite the turbulence wrought from Covid-19, we have stabilised the performance of the REIT, notably with improvements on occupancy as compared to the pre-Covid-19 period.”
“Our proactive leasing management, together with the completion of our asset rejuvenations for select properties, contributed to the improved occupancy. We were able to attract more tenants from expansionary, resilient sectors. We also saw the opening of our new NTP+ lifestyle mall in 1H, which has and will continue to attract new, diverse tenants including in F&B. This resulted from the successful asset enhancement initiative (AEI) at our crown jewel NTP,” he adds.
“While we are firmly on the right track, much work is still required. We are progressing on the next phase of growth and will be removing the Shari’ah compliance requirement of Sabana REIT after careful consideration. Shari’ah compliance has differentiated us in the past, and we are grateful for the ecosystem of support it has given us access to. However, we have taken into account feedback from Unitholders, undertaken our own feasibility studies, considered the REIT’s strategic objectives and assessed the broader macroeconomic landscape in consideration of the changing profile of our tenants. Ultimately, our guiding principle is how best to deliver sustained value for Unitholders and hence our decision to remove the Shari’ah compliance feature.”
Units in Sabana REIT closed flat at 43 cents on July 21.
Photo: Sabana REIT
