Loss of income from a recently divested property, absence of a one-time recovery of costs for another, plus lower revenue and net property income (NPI) due to a challenging market, dampened results for industrial property owner Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (Sabana Reit) in its second quarter.
Distribution per unit (DPU) shrank to 0.62 Singapore cent from 0.82 Singapore cent in the previous year, while Q2 income available for distribution fell 24.1 per cent to S$6.6 million from the previous year.
Payment is due Aug 29 and books will close Aug 2.
Excluding the recovery of costs from the ex-master tenant at 6 Woodlands Loop and loss of income from 9 Tai Seng Drive, Q2 DPU would have been 0.68 Singapore cent.
For the three months ended June 30, gross revenue sank 9.3 per cent to S$18.2 million from the year-ago period. Besides the 9 Tai Seng Drive divestment in the first quarter this year, gross revenue was also impacted by lower average occupancies at 151 Lorong Chuan, 34 Penjuru Lane, 15 Jalan Kilang Barat, 39 Ubi Road 1 and 123 Genting Lane. At 21 Joo Koon Crescent, the previous master lease expired in 3Q 2018 and the new master lease will only start in November 2019.
NPI slid 4.2 per cent to S$12 million from the previous year, with lower property expenses partially offsetting the gross revenue decline.
For the first half of its fiscal year, DPU slid to 1.37 Singapore cents from 1.70 Singapore cents, as income available for distribution fell 19.2 per cent to S$14.5 million.
Overall occupancy levels for Sabana Reit rose to 83.2 per cent as at the end of the quarter, as compared with 82.4 per cent as at March 31. Rental reversions in 2Q 2019 were positive at 3 per cent, compared to negative 3 per cent for the first quarter.
The Reit secured three new leases for a combined 33,055 sq ft in June – two of the leases were for New Tech Park and another was for 2 Toh Tuck Link – and renewed the master lease for 33 and 35 Penjuru Lane for another year.
The Reit noted “challenging market conditions” in its outlook. Chief executive Donald Han said in a statement: “Our headline performance in the quarter was impacted by ongoing industry headwinds and deliberate actions to refine our portfolio for future growth. With Singapore’s GDP at its lowest since the global financial crisis and key indicators pointing to a challenging outlook, we will maintain a ‘market-competitive stance’ to retain existing tenants and bring onboard new ones.”
Sabana Reit also said it will begin this month asset enhancement initiative (AEI) works at New Tech Park at 151 Lorong Chuan to add food and beverage space and lifestyle amenities, including a gym and supermarket. Works are scheduled to complete in the second quarter of 2020.
The AEI represents the start of the second phase of Sabana Reit’s three-pronged strategy. The first was to divest non-performing or mature assets to fund value-accretive propositions and to actively manage and optimise its portfolio; the third is to move Sabana up the industrial supply chain.
Sabana Reit’s portfolio currently comprises 18 Singapore properties in the high-tech industrial, warehouse and logistics, chemical warehouse and logistics, as well as general industrial sectors.
Sabana Reit units closed unchanged at S$0.46 on Thursday before results were announced.