AIMS APAC REIT has reported a distribution per unit (DPU) of 2.27 cents for the 1QFY2025 ended June 30, 1.7% lower y-o-y.

 

The lower DPU is largely attributed to an enlarged base of 811.9 million units during the quarter, 0.3% higher y-o-y.

 

1QFY2025 gross revenue rose by 9.7% y-o-y to $47.3 million while net property income (NPI) was up by 6.6% y-o-y to $34.4 million. The increases were due to higher rental growth, strong rental reversions and high tenant rates. Rental reversion for the period stood at a positive 12.8% while tenant retention rate came in at 91.3%.

Distributions to unitholders rose by 7.3% y-o-y to $18.4 million.

 

Portfolio occupancy as at June 30 fell by 0.8 percentage points y-o-y to 97.3% while portfolio weighted average lease expiry (WALE) stood at 5.2 years, up from 4.3 years in the corresponding period the year before.

 

&ldquo We are pleased to report continued strong operating performance, underpinned by our active asset management and portfolio rejuvenation strategy. The securing of a 15-year master lease and 10-year anchor lease ahead of the commencement of the two identified projects reinforces our asset enhancement initiative (AEI) strategy and demand for such space by leading global companies,&rdquo says Russell Ng, CEO of the manager. &ldquo Once completed, these two assets will generate higher NPI yields of over 7% and deliver long-term sustainable income and capital growth for our unitholders.&rdquo

&ldquo Against an improving but still uncertain macro outlook, we remain resolute in executing our strategy, building our income resilience and capturing new opportunities for growth. With a solid foundation backed by a strengthened balance sheet and our experienced management team, we look forward to another year of continued progress,&rdquo adds George Wang, chairman of the manager.

 

In its outlook statement, the REIT manager says it remains &ldquo confident&rdquo in the REIT&rsquo s portfolio of high-quality and well-located assets.

 

&ldquo The continued progress of the asset enhancement initiatives demonstrates AIMS APAC REIT&rsquo s commitment to its proactive asset management strategy. The revitalisation of the properties will not only provide sustainable long-term income for AIMS APAC REIT but will also improve the asset specifications, property valuation and earnings quality through long-term partnerships with high-calibre tenants in need of modernised industrial and logistics space solutions,&rdquo it says in its July 31 statement.

 

Unitholders will receive their DPUs on Sept 25.

Strong operational performance and capital management are set to drive its growth

 

ANALYSTS are optimistic on Aims Apac real estate investment trust&rsquo s (AA Reit) growth, although its FY2024 distribution per unit (DPU) fell short of expectations.

 

On Wednesday (May 8), both DBS Group Research and RHB lowered their price targets and maintained &ldquo buy&rdquo calls upon cutting earnings estimates to account for rising financing costs and delays in earnings upside from asset enhancements initiatives (AEIs).

 

RHB has adjusted its target to S$1.46 from S$1.48 after lowering DPU estimates for the next two financial years down 2 to 3 per cent, while DBS revised FY2025 DPU projections down about 4 per cent, bringing its target down to S$1.55 from S$1.60.

 

&ldquo While we are enthusiastic about the two upcoming AEIs, which promise attractive yield-on-cost, there may be a near-term earnings impact as the properties undergo improvement work,&rdquo said DBS analysts Dale Lai and Derek Tan, noting that both AEIs are slated to commence later in FY2025, with completion expected in Q3 2025 and Q1 2026, slightly later than initially projected.

 

Although AA Reit&rsquo s full-year DPU missed their estimates on enlarged unit base and higher financing costs, analysts are still positive due to its operational performance and capital management.

 

&ldquo AA Reit has a proven track record of carrying out AEIs and redevelopment projects in its existing portfolio to drive growth in organic income,&rdquo said DBS analysts Lai and Tan. They added that several properties in AA Reit&rsquo s current portfolio have an untapped plot ratio and could generate up to two million square feet of additional gross floor area to drive further growth in earnings and valuations.

 

RHB analyst Vijay Natarajan said AA Reit&rsquo s &ldquo stellar&rdquo rent reversions for logistics assets are expected to continue given the strong market rent growth and its under-rented nature, but at a moderate pace in FY2025 with stable occupancy.

 

Maybank analyst Li Jialin highlighted the manager&rsquo s proactive capital management and maintains a &ldquo buy&rdquo call with a target price of S$1.39 AA Reit. Li said that the Reit manager intends to keep gearing below 38 per cent despite refinancing work ahead. This includes potentially replacing its S$125 million perpetual securities with a new perp or a blend of perp and debt prior to the first reset date in August 2025. 

 

The equity fundraising conducted earlier this year has also bolstered AA Reit&rsquo s balance sheet metrics and provided it with more financial flexibility, DBS&rsquo Lai and Tan added. This helped to lower the Reit&rsquo s gearing to 32.6 per cent. &ldquo Including the planned S$32 million in AEIs, gearing is expected to only inch up to about 34 per cent, still providing them with ample debt headroom,&rdquo they said.

NPI for the period is up 8.7 per cent on the year to S$66.7 million

 

AIMS Apac Reit&rsquo s (AA Reit) distribution per unit (DPU) fell 10.2 per cent to S$0.0471 for the second half ended Mar 31 on an enlarged unit base, from S$0.05244 the year before.

 

Gross revenue for the second half grew 7.4 per cent to S$90.4 million, led by higher rental and recoveries from the Reit&rsquo s logistics and warehouse, as well as industrial properties, said its manager on Tuesday (May 7).

 

The topline was partially offset by lower income from the divestment of 541 Yishun Industrial Park A and lower revenue from Australian properties due to the weakening of the Australian dollar against the Singapore dollar.

 

Net property income (NPI) for the period was up 8.7 per cent on the year to S$66.7 million. The NPI margin increased to 73.7 per cent in H2 FY2024 from 72.9 per cent in H2 FY2023, the manager said.

 

Distribution to unitholders for the half year rose 0.8 per cent, or S$0.3 million, to S$38.2 million on the year. This was driven by higher net property income, partially offset by higher property expenses and higher marketing services commissions incurred in the period.

 

The distribution will be paid out on Jun 24, after the record date on May 16.

 

Meanwhile, for the full FY2024, DPU was 5.9 per cent lower at S$0.0936 despite 3.8 per cent higher distributions to unitholders of S$74.3 million, owing to the enlarged unit base after equity fundraising was completed last July. Full-year NPI was 6.9 per cent higher at S$131 million.

 

Gross revenue rose by 5.9 per cent year on year to S$177.3 million for FY2024, supported by higher portfolio occupancy and strong positive rental reversions on top of high tenant retention rates.

 

Russell Ng, chief executive of the manager, noted that AA Reit will conduct targeted upgrades to meet the occupational requirements of master and anchor tenants, in line with its portfolio revitalisation strategy.

 

&ldquo We have signed a 15-year master lease with a global storage and information management company and are in advanced negotiation to secure a global precision engineering and technology group as an anchor tenant for a new long-term lease for the second project,&rdquo said Ng, adding that the two ongoing asset enhancement initiatives (AEIs), upon completion, will further enhance the Reit&rsquo s portfolio metrics and financial performance over the long term.

 

&ldquo Looking ahead into FY2025, against the backdrop of tight supply for logistics and high-spec industrial spaces, we will continue to evaluate new AEIs, re-development and acquisition opportunities to enhance returns and unlock further value for unitholders.&rdquo  

 

As at Mar 31, 2024, overall portfolio occupancy stood at 97.8 per cent, and aggregate leverage stood at 32.6 per cent with interest coverage ratio at 4.1 times. Weighted average debt maturity was 2.3 years as at the end of FY2024.

 

The manager noted that there is no debt refinancing requirement until Q3 FY2025.

 

AA Reit&rsquo s total 28 properties were valued at S$2.2 billion as at end of the financial year. These comprise S$1.5 billion, or 68 per cent, of investment properties in Singapore and S$0.69 billion of investment properties, including the 49 per cent interest in Optus Centre held through a joint venture, in Australia.

 

&ldquo AA Reit&rsquo s portfolio valuation declined by approximately 1.3 per cent or S$28.8 million from Mar 31, 2023, largely due to the expansion of capitalisation rates for the Australia&rsquo s properties, and offset by higher valuation for the Singapore&rsquo s properties,&rdquo its managed added.