Sabana REIT posts 14.8% lower DPU of 0.75 cent amid market challenges, portfolio optimisation

Michelle Zhu

SINGAPORE (April 22): The manager of Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (Sabana REIT) has announced a 1Q19 DPU of 0.75 cent, down 14.8% y-o-y from 0.88 cents a year ago due to lower revenue and net property income (NPI).

This was largely attributed by the manager to a challenging market and portfolio optimisation, which saw the REIT divest non-performing and mature properties in recent quarters.

Revenue for 1Q19 fell 11.8% on-year to $18.5 million from $21 million, whereas NPI fell 13.3% to $12.7 million from $14.6 million in the previous year.

These came mainly due to lower property contributions, namely the absence of income from 9 Tai Seng Drive following its divestment in 1Q19; reduced rental income from 151 Lorong Chuan due to the relocation of a significant tenant; lower occupancies at 8 Commonwealth Lane and 34 Penjuru Lane; as well as an expired master lease at 21 Joo Koon Crescent since 3Q18.

Further, there was an absence of a one-time payment versus the same period last year.

In line with the lower property income, property expenses fell 8.5% to $5.9 million from $6.4 million previously.

Net finance costs however grew 7.3% y-o-y to $4.2 million from $3.9 million in 1Q18 as finance costs on lease liabilities were recognised upon the adoption of FRS 116 since Jan 2019.  

According to Sabana REIT’s manager, this was however offset in part by using proceeds from 9 Tai Seng Drive’s divestment to repay short-term borrowings, as well as redeeming higher cost facilities with lower cost facilities.  

As at end-March, overall occupancy levels stood at 82.4% versus 84.4% as at end-Dec 2018. Had 1 Tuas Avenue 4 been divested, the occupancy rate would have been at 85.5%.

Looking ahead, Sabana REIT’s manager expects overall rent reversions for 2019 to remain negative, and intends to focus on its growth plan through active asset management and progressing on proposed AEIs.

“We experienced some challenges at the start of 2019 as we make necessary adjustments to the portfolio for the longer term. Already, the work from the past year is bearing fruit, enabling us to boost the distributable amount to unitholders from divestment proceeds from nonperforming and mature properties. Our actions have also given us sufficient debt headroom and the flexibility to undertake growth initiatives,” comments Donald Han, CEO of the manager.

Units in Sabana REIT closed flat at 42 cents on Thursday.