ESR REIT posts 2Q18 net property income up 22 percent on new acquisitions

Singapore two-dollar bills

ESR REIT reported on Monday that its net property income for the second quarter rose 22 percent on-year to S$23.4 million, mainly on the full quarter contributions from two acquisitions made in mid-December.

Gross revenue increased 17.6 percent on-year to S$32.5 million, the REIT manager said in a filing to SGX after the market close on Monday.

ESR REIT attributed the rental growth to the full-quarter contributions from the December acquisitions of 8 Tuas South Lane and 7000 Ang Mo Kio Avenue 5 (“7000 AMK”) and rent escalations from several properties. That was partially offset by revenue reduction from the master lease conversion of property at 16 Tai Seng (2Q2018), 21B Senoko Loop (1Q2018) and 3 Pioneer Sector 3 (3Q2017) to multi-tenancy, as well as the expiration and non-renewal of leases at three properties and the absence of revenue from four divestments since the second quarter of 2017, it said.

It noted that of the three non-renewal properties, one is currently being divested while another is undergoing an asset enhancement initiative conversion into a high-specs building.

The distribution per unit (DPU) was 1.001 Singapore cents, up 4.7 percent on-year from 0.956 Singapore cent in the year-earlier quarter on the higher net property income and gains from previous divestments, ESR REIT’s manager said.

Portfolio occupancy increased by 0.7 percent on-quarter to 91.4 percent in the second quarter, it said.

For the first half, net property income rose 21.4 percent on-year to S$47.23 million, while gross revenue increased 19.4 percent on-year to S$66.15 million, it said.

In its outlook, the REIT manager was cautious.

“Although an increase in enquiries have been noted recently, the manager expects the leasing market to remain competitive notwithstanding that demand and supply dynamics appear to be improving as historically high supply levels look to taper off by late 2018,” it said.

ESR REIT and Viva Industrial Trust have issued a joint announcement on a proposed merger, with an extraordinary general meeting set for 31 August, it noted.

ESR REIT has a portfolio of 47 properties in Singapore with more than 196 tenants in subsectors including logistics/warehouse, hi-specs industrial, light industrial, general industrial and business park, it said. The portfolio has a carrying value of around S$1.65 billion and a total gross floor area of approximately 9.7 million square feet, it said.

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