ESR-REIT has reported a distribution per unit (DPU) of 0.997 cents for the 2HFY2024 ended Dec 31, 2024, bringing its FY2024 DPU to 2.119 cents. On a y-o-y basis, the REIT’s 2HFY2024 DPU and FY2024 DPU declined by 15.9% and 17.4% respectively.
In 2HFY2024 and FY2024, the REIT reported losses of $113.7 million and $127.8 million respectively.
In FY2024, gross revenue fell by 4.1% y-o-y to $370.5 million while net property income (NPI) fell by 4.2% y-o-y to $261.7 million.
The declines for both were mainly due to the loss of income from the REIT’s divested non-core assets, 182-198 Maidstone Street in Australia and 81 Tuas Bay Drive in Singapore. The Australian property was divested in 2Q2024 while the Singaporean property was sold in 4Q2024. The decommissioning of the REIT’s property at 2 Fishery Port Road also contributed to the lower revenue. The divestments were partly offset by contributions from the acquisitions of ESR Yatomi Kisosaki Distribution Centre and 20 Tuas South Avenue 14 which were both completed in November 2024, as well as the asset enhancement initiatives (AEIs) for 7002 Ang Mo Kio Avenue 5 and 21B Senoko Loop. The AEIs were completed in 3Q2023 and 1Q2024 respectively.
Distributable income for the year fell by 14.9% y-o-y to $164.1 million due to the lower revenue and NPI as well as lower distribution of capital gains from the sale of investment properties in the previous years.
The applicable number of units for distribution in FY2024 rose by 3% y-o-y to 7.74 billion.
Meanwhile gross revenue for 2HFY2024 stood relatively stable at $189.6 million from $189.5 million in 2HFY2023 although NPI rose by 1.1% y-o-y to $133.8 million.
2HFY2024 distributable income fell by 14.7% y-o-y to $77.8 million while the number of units rose by 1.5% y-o-y to 7.8 billion.
As at Dec 31, 2024, the REIT reported positive rental reversion of 10.3%, compared to FY2023’s 11.1%. Its occupancy rate stood at 92.3%, down from FY2023’s 92.8%. Its weighted average lease expiry (WALE) stood at 4.2 years.
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Gearing stood at 42.8% as at the same period while the REIT’s MAS adjusted ICR stood at 2.5 times. MAS refers to the Monetary Authority of Singapore while ICR refers to interest coverage ratio. The MAS streamlined its leverage requirements in November 2024.
As at Dec 31, 2024, cash and cash equivalents stood at $70.2 million.
In its release, Adrian Chui, CEO of the REIT manager, notes that the REIT’s “4R strategy” is “beginning to deliver income growth” and is expected to translate into revenue and DPU growth. The four Rs refer to the REIT capitalising its balance sheet, rejuvenating its asset portfolio, recycling capital and reinforcing its sponsor’s support.
“Our portfolio's quality has continued to stand out as we reported a positive 10.3% rental reversion – underscoring the effectiveness of our portfolio rejuvenation strategy of divesting dated, non-core assets while maintaining a resilient and in-demand portfolio amidst evolving market conditions,” he says. “In addition, we successfully recycled the divestment proceeds into two transformational acquisitions: ESR Yatomi Kisosaki Distribution Centre in Japan and a 51% interest in 20 Tuas South Avenue 14 in Singapore, which are expected to be +3.0% DPU accretive on a pro forma basis.”
While Chui expects the REIT’s improved portfolio fundamentals to translate into NPI and DPU contributions in FY2025, he remains “cautiously optimistic” about demand for real estate, rental growth and operating costs in 2025 amid macroeconomic uncertainties, policy shifts in the US and inflation concerns.
Units in ESR-REIT closed flat at 26 cents on Jan 23.
