In its recent results for 3QFY2020 ended Sep 30, SBREIT demonstrated – what Ng calls – a “commendable performance”.
This is as its distribution to unitholders surged 20.8% year-on-year to $14 million, following an 8% year-on-year increase in its gross revenue to $22.9 million. Of this, $3.1 million came from collections from the REIT’s facility at 25 Grenfell Street in Adelaide, Australia.
See: Soilbuild REIT 3QFY2020 DPU up 19.8% y-o-y to 1.10 cents
This contribution helped offset the lower rents from SBREIT’s facilities at Tuas Connection (-$0.5 million) and 72 Loyang Way (-$0.2 million)
Ng also points out to a 1.3% positive rental reversion to SBREIT’s new leases as well as a 1.2% increase in its lease renewals.
The “better-than-expected” take up for the REIT’s properties is seen in a 3.4% quarter-on-quarter increase in its overall portfolio occupancy to 92.9%.
SBREIT’s portfolio comprises properties used for manufacturing, engineering, logistics, warehousing, electronics, marine oil & gas, research and development and knowledge-based activities.
Of these 11 properties – comprising two business parks and nine industrial sites are in Singapore, while another three are in Australia.
Collectively, these facilities have a gross floor area of 600,378 square feet.
Looking ahead, Ng believes that demand for industrial assets may diverge as the impact of the Covid-19 pandemic filters through the economy.
“In addition to warehouse and logistics assets, we believe that business parks have the most potential to outperform as the economy recovers post-COVID-19,” notes Ng.
He believes SBREIT’s performance will be stronger come 2022, when its redevelopment works finish at 2 Pioneer Sector 1.
The works – if done on a 1.0 plot ratio is expected to cost some $82 million, while the cost edges up to $91 million if done on a plot ratio of 1.32.
As at 3Q2020, this asset accounted for 4% of SBREIT’s portfolio and should provide a conservative 4 – 5% increase in its Net Property Income (NPI) upon completion, says Ng.
Still, he expresses caution on the REIT’s leverage ratio.
“While SBREIT’s current 37% gearing is still a conservative level away from the Monetary Authority of Singapore’s new 50% limit, we note that the its gearing is expected to increase from a double hit of falling property prices and higher debt due to the redevelopment of 2 Pioneer Sector 1”.
Units in SBREIT were flat at 49 cents as at 2.26.
