ESR-LOGOS REIT (E-LOG) J91U announced an amount available for distribution of $86.3 million in 1HFY2024, down 15.0% y-o-y, translating into distribution per unit (DPU) of 1.122 cents, down 18.6% y-o-y.

 

The decrease in DPU was mainly attributed to the divestment of 11 non-core assets completed in FY2023 and 2QFY2024 and lower distribution of capital gains from the sale of investment properties in prior years, as well as an enlarged unit base of 4.4% in applicable number of units from 7,363.9 million units to 7,685.4 million units due to the equity fund raising (EFR) conducted in 1HFY2023.

 

The proceeds from the divestments and EFR have yet to be redeployed, which contributed to the drop in DPU. This decrease in amount available for distribution to unitholders was partially offset by lower borrowing costs from the repayment of debts using the proceeds from the EFR and divestment of non-core assets.

 

Gross revenue in 1HFY2024 declined 8.1% y-o-y to $180.9 million, due to the divestment of 10 non-core assets of $440.6 million completed in FY2023 and 182-198 Maidstone Street located in Australia in 2QFY2024, which were part of E-LOG&rsquo s capital recycling strategy.

 

In addition, the decommissioning of 2 Fishery Port Road also contributed to the income loss. The above were partially offset by additional income contributions from 7002 Ang Mo Kio Avenue 5 and 21B Senoko Loop which completed their AEI in 3QFY2023 and 1QFY2024 respectively.

 

NPI in the first half fell by 9.2% y-o-y to $127.8 million. On a same-store basis, gross revenue and net property income (NPI) grew 1.6% and 0.5% y-o-y, respectively.

 

E-LOG delivered positive rental reversions of 11.2% in the first half, driven by logistics (+14.3%) and high-specs industrial (+13.8%). As at June 30, E-LOG&rsquo s portfolio occupancy remained stable at 91.4%, supported by strong demand for from new economy sectors.

 

During the first half, 99,884 sq m of space was leased, comprising 74,368 sq m of lease renewals (74.5% of total leases) and 25,516 sq m of new leases (25.5% of total leases). E-LOG&rsquo s weighted average lease expiry as at June 30 was 3.3 years, up from 3.1 years in the previous year. 

 

The AEI at 7002 Ang Mo Kio Avenue 5, which was completed in September 2023, has achieved approximately 87% occupancy. Rental collections remained healthy at approximately 98.7% of total receivables.

 

In 1HFY2024, the manager announced the attainment of TOP for the built-to-suit redevelopment at 21B Senoko Loop for NTS Singapore Pte Ltd (NTS), transforming the property from a general industrial property to a Green Mark Gold certified high-specifications property.

 

Under the redevelopment agreement, 21B Senoko Loop will be leased to NTS on a triple net basis for 15 years and will have built-in annual rental escalations. NTS will fully bear the payment of utilities, maintenance expenses, property tax and land rent.

 

As at June 30, aggregate leverage stood at 36.5%, providing significant debt headroom for its growth strategy. E-LOG has a commitment from a panel of lending banks to provide E-LOG with its first sustainability linked loan facility.

 

This new facility, which was completed in April, has been used to refinance all the credit facilities that are expiring in FY2024. As such, there are no refinancing risks posed for E-LOG for the remainder of FY2024.

 

Debt expiry remains well spread with a weighted average debt expiry of 2.1 years and an all-in cost of debt at 4.03% 75.0% of its interest rate exposure is fixed.

 

As at end-June, E-LOG had a debt headroom of $692.8 million and access to $229.8 million of committed undrawn revolving credit facilities. E-LOG remains well supported by 10 lending banks.

 

On July 31, E-LOG announced the proposed acquisition of a 100% interest in a freehold modern logistics asset, ESR Yatomi Kisosaki Distribution Centre, Japan as well as a 51% interest in a high-specification manufacturing facility, 20 Tuas South Avenue 14, Singapore, with remaining land lease of approximately 44 years, for a total acquisition outlay of approximately $772.6 million.

 

The two proposed acquisitions are expected to be +1.8% DPU accretive, and are acquired at a 2.3% discount each to their respective average valuation. The two proposed acquisitions are from E-LOG&rsquo s sponsor, ESR Group&rsquo s asset pipeline.

 

The acquisition aligns with E-LOG&rsquo s &ldquo 4R Strategy&rdquo , focused on (i) rejuvenating the asset portfolio, (ii) recycling of capital, (iii) recapitalising for growth and (iv) reinforcing the sponsor&rsquo s commitment.

 

The acquisition will improve E-LOG&rsquo s key portfolio by increasing E-LOG&rsquo s new economy assets and portfolio underlying land lease pivoting the portfolio will pivot towards future-ready green assets scaling up the Japan presence with sizeable freehold asset while tapping on ESR Japan&rsquo s on the ground expertise for economies of scale and acquiring a new Singapore property with committed occupancy of 99.7% and close proximity to Tuas Mega Port.