UPDATE: AIMS AMP Capital Industrial REIT fiscal 2Q net property income nearly flat

Singapore two-dollar billsSingapore two-dollar bills

AIMS AMP Capital Industrial REIT, or AA REIT, reported its fiscal second quarter net property income slipped 0.5 percent on-year to S$19.29 million as the loss of income from a divestment and lower revenue from other properties was partly offset by contributions from an acquisition.

Gross revenue edged down 0.3 percent on-year to S$29.42 million for the quarter ended 30 September, it said in a filing to SGX before the market open on Thursday.

“This was mainly due to lower rental contribution from 20 Gul Way (as two additional phases of the property reverted to multi-tenancy leases since September 2017), 27 Penjuru Lane and 1 Bukit Batok Street 22 as well as the loss of revenue from 10 Soon Lee Road following the divestment of the property on 29 March 2018,” the REIT’s manager, AIMS AMP Capital Industrial REIT Management, said in the filing.

“The drop was partially offset by maiden rental contribution from 51 Marsiling Road from 27 April 2018 and the rental contribution from 8 Tuas Avenue 20 as the property became income producing in the third quarter of 2018,” it added.

The share of results of a joint venture, net of tax, fell 5.1 percent on-year to S$3.55 million due to the Australian dollar weakening against the Singapore dollar, AA REIT’s manager said. That was from its 49.0 percent interest in Optus Centre, which is located in Macquarie Park, New South Wales, Australia.

The distribution per unit for the quarter was 2.50 Singapore cents, flat on-year, it said. The ex-date is 1 November, while the payment date is 21 December, it said.

Portfolio occupancy rose to 93.6 percent from 91.5 percent in the previous quarter, it said.

“We are pleased to deliver another quarter of stable distribution despite the challenging market environment,” Koh Wee Lih, the manager’s CEO, said in the statement.

“We continue to focus on asset and lease management. Through active evaluation of our assets, we are constantly considering redevelopment opportunities to strengthen the quality of our portfolio and to ensure AA REIT remains competitive in the current operating environment,” he said.

For the fiscal first half, AA REIT reported net property income fell 2.0 on-year to S$38.72 million, while gross revenue in the six months fell 2.8 percent on-year to S$58.34 million. The DPU for the fiscal first half was 5.00 Singapore cents, down 1.0 percent from 5.05 Singapore cents in the year-ago period, it said.

Cautious outlook

The REIT manager issued a cautious outlook.

“The Singapore economy is expected to moderate in the second half of 2018 in tandem with the growth outlook of Singapore’s key final demand markets, including the U.S., Eurozone and regional economies,” AA REIT’s manager said.

“At the same time, uncertainties and downside risks in the global economy have increased, including escalating trade conflicts between the U.S. and its key trading partners and expected rising of interest rates, which may continue to cloud the outlook for the Singapore manufacturing sector,” the filing said.

It noted that JTC Corp.’s market report for the second quarter of 2018, released 26 July, showed Singapore’s overall industrial property market had an occupancy rate of 88.7 percent, down 0.3 percentage point on-quarter but unchanged on-year, while the rental index fell by 0.1 percent on-quarter and 1.4 percent on-year.

“As new supply is expected to taper in the coming years, prices and rentals should stabilize in tandem with occupancy rates,” it said.

The REIT is currently redeveloping its 3 Tuas Avenue 2 property and carrying out an asset enhancement initiative at NorthTech, with both projects set to complete in the second half of next year, it said.

AA REIT has a portfolio of 26 industrial properties, comprising 25 in Singapore and a 49.0 percent interest in the Optus Centre business park property in Australia.

This article was originally published on Thursday 25 October 2018 at 8:03 A.M. SGT; it has since been updated. 

Get the Shenton Wire morning briefing in your inbox