Aims Apac REIT's (AA REIT) Distribution Per Unit and Net Property Income both increased 1.1% year on year with a positive rental reversion of 7.7% and occupancy of 93.3% and Weighted Average Lease Expiry of 4.2 years. Revenue however increased just 0.2%, tenant retention fell to 68.3% year on year, and its income covers interest expenses only 2.5 times.
76.3% of gross rental income comes from Singapore, exposing AA REIT to the risk of over concentration in one market, such as local economic downturns or policy changes (like JTC rules). Despite the US Fed lowering rates recently, macroeconomic conditions are not favourable. A slowdown in manufacturing or exports could hurt demand for industrial/logistics space, forcing tenants in non-essential sectors to downsize or default.
AA REIT's asset enhancement to secure a 15-year master lease with a global storage and information management firm, and proposed acquisition of an asset are favourable indicators. The proposed acquisition of an asset at 2 Aljunied Avenue 1 will deliver an Net Property Income yield of 8.1%, which is quite a strong yield, and Distribution Per Unit accretion of 2.5%.
Aims Apac REIT’s results are steady and show moderate rental growth, but sustaining DPU growth will depend on keeping occupancy high, managing financing costs, and maintaining positive rental reversions.
References:
- https://www.businesstimes.com.sg/companies-markets/aims-apac-reits-h1-dpu-rises-1-1-s0-0472
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