To The Moon

In JTC’s latest market report for the second quarter of 2024, it noted that industrial rents rose 1% quarter on quarter, recording the slowest rate of increase since Q1 2022 following the Covid-pandemic recovery. On a year-on-year (yoy) basis, industrial rents are still up 6.6%. Overall occupancy rates rose 0.3 percentage point to 89% as new demand continues to outpace supply increases.

The six industrial S-Reits with significant Singapore-based industrial assets have posted mixed performances in the latest round of earnings releases and business updates.

Industrial Reits maintain resilience despite sector’s slowdown

Across the board, distributions per unit (DPU) were also lower yoy, impacted by higher borrowing costs and property operating expenses – except for $Mapletree Ind Tr(ME8U.SI)$ , which declared a 1.2% higher DPU of 3.43 Singapore cents for its Q1 FY25.

1. $Mapletree Ind Tr(ME8U.SI)$

MIT’s gross revenue and net property income (NPI) for Q1 rose by 2.7% and 1.3% yoy, respectively. Improvements were mainly attributed to revenue contributions from the data centre in Osaka, which MIT acquired in September 2023, as well as new leases and renewals across various properties.

MIT’s portfolio occupancy increased from 91.4% to 91.9% and observed positive rental reversions in Singapore with a weighted average rental revision rate of about 9.2%.

2. $Sabana Reit(M1GU.SI)$

Despite softer performances across industrial S-Reits, all six Reits recorded positive rental reversions ranging from 2.6% to 16.8%. Sabana Industrial Reit recorded the highest rental reversion at 16.8%, continuing its 14th consecutive quarter of positive rental reversions.

Its manager continues to proactively engage existing tenants ahead of lease expiries, and has renewed and replaced 53.5% of its leases expiring in FY2024, with another 42.6% under lease negotiations.

The six industrial S-Reits have an average aggregate leverage ratio of 37%, below the S-Reit sector’s average of 39.1% and well below regulatory limits of up to 50% – which provides flexibility for potential debt headroom to fund capital-intensive acquisitions.

3. $ESR-REIT(J91U.SI)$

ESR-Logos Reit : J91U 0% (E-Log) recently announced acquisitions of two facilities in Japan and Singapore for S$772.6 million, consisting of a freehold distribution centre in Nagoya and a 51% interest in a Singapore high-specifications manufacturing facility. Both acquisitions are expected to improve E-Log’s portfolio metrics and create a resilient and future-ready green portfolio as part of its 4R Strategy.

In terms of price performance, the six industrial S-Reits have declined 6.1% in average total returns in the year to date. They trade at an average price-to-book (P/B) ratio of 1x, which is at a discount of about 11% against the five-year average P/B ratio.

4. $Mapletree Log Tr(M44U.SI)$

Three S-Reits that are currently trading at largest discounts to their five-year average P/B ratios are $Mapletree Log Tr(M44U.SI)$ , E-Log and Sabana Industrial Reit.

MLT reported lower gross revenue and NPI of 0.3% and 0.9% yoy, respectively, largely due to weaker performance in China, the absence of revenue from divested properties and depreciations of both the yen and the yuan against the Singapore dollar.

During Q1 FY25, MLT completed the acquisitions from its sponsor of three modern Grade A assets in Malaysia and Vietnam, deepening its footprint in markets poised to benefit from the structural trends of supply chain diversification and consumption growth.

The iEdge S-Reit Index has delivered a negative total return of 4.6% since end-2019, with industrials as a sub-segment being the second best performing with 7.9% positive total returns after data-centre Reits.

https://www.sgx.com/research-education/market-updates/20240826-reit-watch-industrial-reits-maintain-resilience-despite