|
|
Over the last two weeks, five Industrial REITs – Ascendas Real Estate Investment Trust, Cache Logistics Trust, Cambridge Industrial Trust, Sabana Shar’iah Compliant Industrial REIT, and Soilbuild Business Space REIT – reported earnings for the three months ended 30 June 2016. These five Industrial REITs have a combined market capitalisation of S$9.2 billion. The Singapore Exchange (SGX) lists 31 Real Estate Investment Trusts (REITs) and six stapled trusts. Two REITs – Manulife US REIT and Frasers Logistics & Industrial Trust – were listed recently on SGX, on 20 May and 21 June respectively. The Global Industry Classification Standards (GICS®) classifies eight of these as Industrial REITs. Under GICS®, Soilbuild Business Space REIT, which owns a portfolio of two business parks and nine industrial properties, is categorised as a diversified REIT. Industrial REITs are companies or trusts engaged in the acquisition, development, ownership, leasing, management and operation of industrial assets, which include warehouses and distribution properties. Three other Industrial REITs will announce their quarterly results this week – Mapletree Logistics Trust will report its 1Q earnings today after the market close, while Mapletree Industrial Trust and AIMS AMP Capital Industrial REIT will report their 1Q results tomorrow. Frasers Logistics & Industrial Trust is expected to unveil its 3Q earnings in August. The eight trusts on SGX classified by GICS® as Industrial REITs have a combined market capitalisation of S$16.7 billion. In the year thus far, they have averaged a dividend-adjusted total return of 5.2%, bringing their one-year and three-year total returns to -3.9% and 9.0% respectively. For the quarter ended June 30, 2015, the five Industrial REITs averaged a 10.0% year-over-year decline in distribution per unit (DPU). Ascendas REIT posted the highest DPU and was the only trust that generated positive YoY growth. Cambridge Industrial Trust registered the lowest DPU, reflecting a 12% YoY fall. Sabana REIT posted the sharpest YoY fall of 31.7% in its DPU, hit by a 4.6% revaluation loss on its investment properties, against a backdrop of sluggish rental markets and oversupply of industrial space. These trusts averaged a 3.9% YoY rise in net property income and a 7.2% YoY increase in gross revenue for the June quarter. Cache Logistics Trust posted the strongest YoY growth of 21.9% and 30.3% for its net property income and gross revenue respectively. On average, the five REITs had an aggregate leverage ratio of 38.3% as of the quarter ended 30 June. This compares with an average of 38.0% in the three months ended March 31. Interest cover for the five trusts averaged 4.3 times in the June quarter, compared with an average of 4.5 times in the March quarter. Among the five trusts, those with the highest leverage ratios in the June quarter were Sabana REIT at 41.2% and Cache Logistic Trust at 39.8% respectively. Soilbuild Business REIT and Ascendas REIT had the lowest leverage ratios of 35.9% and 37.0% respectively. Outlook All five REITs described the outlook for industrial properties as difficult. The Manager of Sabana REIT noted that amidst sluggish rental markets and relatively high upcoming supply, the performance of industrial REITs is expected to come further under pressure. Market conditions are likely to remain challenging in view of the uncertainties following Britain's vote to exit the European Union last month, which will weigh on the global economy, it added in its quarterly results statement. Philip Levinson, CEO of Cambridge Industrial Trust Management Ltd, said the trust remains cautious about the outlook for the industrial sector as a whole. “The difficult economic environment creates challenges for our clients, and in turn may continue to affect our performance,” he noted in the REIT’s quarterly results statement. Roy Teo, CEO of SB REIT Management Pte Ltd, the Manager of Soilbuild REIT, noted that its portfolio occupancies have dipped to 92.0% as at the end of 2Q FY2016, following the slowdown in the manufacturing sector. With 86% of FY2016 lease expiries due for renewal in the first-half of 2016, the challenge remains to re-let the vacant space and renew the multi-tenanted leases expiring for the rest of the year. These make up 2.0% of the portfolio’s net lettable area, he said in the trust’s quarterly results statement. For Cache Logistics Trust, the operating environment in Singapore continues to be challenging due to uncertainties in the global economy, as well as weak supply and demand dynamics. Underlying the sluggishness in the domestic economy, the Singapore Purchasing Managers’ Index fell to 49.6 in June 2016, recording its 12th month of contraction, it noted in its quarterly results statement. However, in Australia, where Cache owns six logistics warehouses, overall economic growth is continuing. Domestic demand, as well as exports, has been expanding at a pace in line with or above trend. The weighted average lease expiry (WALE) for Cache’s Australian portfolio averages approximately 6.6 years, enabling the trust to ride on the longer term growth in the country, it added. Ascendas REIT pointed out that with significant new supply and tepid economic growth both in Singapore and globally, there may be pressure on occupancy growth. With 11.7% vacant space in its domestic portfolio, there is potential upside when the space is leased, and modest rental reversion can be expected, as average passing rental rates are close to current market rates, it said in its quarterly results statement. Over in Australia, A-REIT said demand for logistics space is expected to be strong, backed by a steady labour market, weaker Australian dollar and firm consumer spending. The outlook is positive for the 9.1% of vacant space and 2.2% of gross revenue due for expiry in FY16/17 in the Australian portfolio. Barring any unforeseen events and any weakening of the economic environment, the Manager expects A-REIT to maintain a stable performance for the financial year ending 31 March 2017, it added. ^The estimated DPU for 1Q FY16/17 has been computed on the basis that no Exchangeable Collateralised Securities will be exchanged into Units before the next books closure date. The actual DPU may differ if A-REIT receives Exchange Notices before the next books closure date. *Includes taxable, tax exempt and capital distributions of 3.817 cents, 0.161 cents and 0.018 cents respectively #Based on 896,415,919 issued units, which includes 894,943,144 issued units as at 30 June 2016 and 1,472,775 units to be issued to the Manager as partial consideration of Manager’s fees #Before refinancing of S$100 mln term loan facility on 8 April 2016 ~profit cover - ratio of net property income over profit expense The table below details the eight trusts classified by GICS® as Industrial REITs, sorted by name. Note that clicking on a trust name will bring you to its profile page on SGX StockFacts. Soilbuild Business REIT, which is classified by GICS® as a Diversified REIT, has been omitted from this table. |
FTSE Mondo Visione Exchanges Index:
.jpg)
SGX: Five Industrial REITs Report June Quarter Earnings
Date 25/07/2016
