Real estate investment trusts with property portfolios that consist of industrial properties based in Singapore have been seeing improving results in their quarterly releases so far. We have had Sabana Shari’ah REIT (SGX: M1GU) and Mapletree Industrial Trust (SGX: ME8U) both report year-on-year increases in distributions and earlier today, AIMS AMP Capital Industrial REIT (SGX: O5RU) joined in the fray. AACIR’s has 25 industrial properties under its belt “strategically located in Singapore serving as infrastructure to the port and airport facilities”. They are valued collectively at around S$1.09b as of 30 Sep 2013. The REIT’s second quarter…
We have had Sabana Shari’ah REIT (SGX: M1GU) and Mapletree Industrial Trust (SGX: ME8U) both report year-on-year increases in distributions and earlier today, AIMS AMP Capital Industrial REIT (SGX: O5RU) joined in the fray.
AACIR’s has 25 industrial properties under its belt “strategically located in Singapore serving as infrastructure to the port and airport facilities”. They are valued collectively at around S$1.09b as of 30 Sep 2013.
The REIT’s second quarter earnings saw gross revenue for the quarter increase 24.8% year-on-year to S$24.5m. Net property income followed suite with an increase of similar magnitude at 23.6% to S$15.7m.
Distributable income at AACIR had jumped a stunning 29.2% to S$14.5m compared to a year ago. Unfortunately, distributions per unit (DPU) only managed a comparatively meagre 10% increase to 2.75 Singapore cents – that’s what happens when REITs undergo private placements to dilute existing unit holders.
In AAIR’s case, the bulk of the dilution occurred on 2 May 2013 when it issued 68.75m new units in a private placement back when it had 449m units outstanding. The REIT now has a total of 526.6m units in existence as of 30 Sep 2013.
The growth in gross revenue was mainly due to contributions from the new development at 20 Gul Way (Phase One and Two of the development had become income-producing in Dec 2012 and July 2013 respectively) and higher rental rates from the 27 Penjuru Lane property.
Property expenses increased mostly in-line with the growth in gross revenue, which accounted for the gains in net property income.
Other expenses, such as borrowing costs in particular, were slashed. This allowed distributions to grow even faster than gross revenue and net property income.
For some operational highlights, the REIT had achieved 98% occupancy-rates in its portfolio and saw rents increase by a weighted-average of 20.7%.
Turning to AACIR’s balance sheet, unitholders will be pleased to know that have been improvements across the board compared to a year ago.
The REIT’s gearing has decreased from 31.5% to 25.2%; total debt has dropped from S$308m to S$279m; and, interest cover has gone up from 4.8 times to 6.3 times.
For some outlook for the financial year ending 31 March 2014, the REIT has an eye out for rising interest rates which can affect funding costs. In preparation, it has positioned its capital structure such that there’s “no debt due for refinancing until Oct 2015, with 100% of its debt fixed for an average of 2.7 years.”
The REIT also saw the industrial property market in Singapore enter “a relatively steady state in 2Q 2013 with stable rents and marginal growth in capital values.” That could mean flat performance for AACIR on a quarter-on-quarter basis for the next few quarterly earnings releases, but no one really has a working crystal ball.
The REIT’s results were pretty well-received by the market as its units have gone up 2.7% to S$1.525 at the time of writing (12 noon, 23 Oct 2013) even as the Straits Times Index (SGX: ^STI) only managed a 0.3% increase.
At that price, units of AACIR are valued at 1 times book value, and carry a distribution yield of 6.9% based on annualising its half-year pay-out of 5.25 Singapore cents for the current financial year.
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