Aims Apac Reit’s 9M DPU down 4.1% to S$0.0699 on enlarged unit base

Aims : O5RU 0% Apac Reit : O5RU 0% (AA Reit) on Wednesday (Jan 31) posted a 4.1 per cent drop in distribution per unit (DPU) of S$0.0699 for the nine months ended Dec 31, 2023, from S$0.0729 in the same period the previous year.

This was due to an enlarged unit base resulting from an equity fundraising in July 2023 to strengthen the real estate investment trust’s (Reit) balance sheet and support asset enhancement initiatives and future growth opportunities, the manager said.

Gross revenue for the period rose 5.1 per cent to S$131.6 million from S$125.2 million in the same period the prior year, supported by higher portfolio occupancy, positive rental reversions and a high tenant retention rate across AA Reit’s Singapore properties.

As a result, net property income climbed 6.3 per cent to S$97.8 million from S$92 million in the previous corresponding period.

Distributions to unitholders increased 5.2 per cent to S$55.1 million from S$52.4 million recorded in the same period a year earlier. They will be paid on Mar 22, after the record date on Feb 9.

“The active asset management of our portfolio has resulted in resilient occupancy at around 98 per cent and sustained demand from national and global corporates,” said Russell Ng, chief executive of AA Reit’s manager.

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The Reit recently renewed two master leases with Kintetsu World Express and Aalst Chocolate, which raised its portfolio weighted average lease expiry to 4.6 years as at Dec 31, 2023, from 4.2 years as at Sep 30, 2023.

Lease renewals in the third quarter helped the Reit achieve a rental reversion rate of 13 per cent.

Overall portfolio occupancy stood at 98.1 per cent as at Dec 31, 2023, up from 97.8 per cent as at Dec 31, 2022.

The Reit’s gearing fell 4.2 percentage points to 32.2 per cent as at end-December 2023, after the equity fundraising was completed. No debt refinancing is needed until Q2 2025, the manager noted.

It added that 76.4 per cent of debt is on fixed rates, and the average fixed debt tenure is around 1.9 years.

Although AA Reit’s 9M 2024 DPU missed DBS Group Research’s estimates, it is optimistic that Q4 distributions could make up for the shortfall, based on a research note on Wednesday.

The Reit’s ability to maintain high occupancy rates and sustain positive rental reversions, along with expectations of stable borrowing costs, are also seen as positive indicators.

DBS has maintained its “buy” recommendation on the counter, with a target price of S$1.60. The Reit ended 1.6 per cent or S$0.02 higher at S$1.31 on Wednesday.