DAIWA House Logistics Trust : DHLU 0% has posted a distributable income of S$27 million for the nine months ended Sep 30; this is up 2.2 per cent from S$26.4 million for the same period last year. The income growth was supported by contributions from properties acquired in December 2022, and realised foreign exchange gains related to hedges put in place, the manager of the real estate investment trust (Reit) said on Friday (Nov 3).

This came as gross rental income and net property income (NPI) rose on a yen basis, although NPI in Singapore dollar terms fell by 6.4 per cent due to a weaker yen against the Singapore dollar.

Gross rental income rose 4.9 per cent on a yen basis to 4.1 billion yen (S$37.2 million) from 3.9 billion yen in the same period last year. Meanwhile, NPI was up 3.9 per cent on the year to 3.5 billion yen from 3.4 billion yen.

The Reit’s aggregate leverage stood at 36.2 per cent as at end September, up from 35.7 per cent recorded at the end of June. Total borrowings stood at 34 billion yen, and borrowings were fully denominated in yen to provide a natural hedge, the manager said. All its borrowings were also made on a fixed-rate basis, mitigating interest rate risks amid a volatile interest rate environment.

The Reit’s interest coverage ratio remained high, at 11.8 times for the nine-month period. The manager added that there are no refinancing requirements until November 2024.

Portfolio occupancy remained full as at Sep 30, 2023, with a weighted average lease expiry of 6.3 years by gross rental income. The manager noted that there were no leases up for renewal in the third quarter.

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Jun Yamamura, chief executive of the manager, expects the operating environment to be challenging in the short term due to the substantial increase in new supply in the Japanese logistics market. “However, demand is expected to remain healthy, supported by the 3PL (third-party logistics) and e-commerce sectors. Our portfolio is supported by a strong tenant base, with more than 80 per cent of the tenants by GRI (gross rental income) involved in such sectors.”

The Reit renewed a lease in October 2023. The manager noted that two remaining leases will expire in FY2023; the tenants have shown an intention to renew them, and term negotiations are underway.

Daiwa House Logistics Trust’s units were trading 1 per cent or S$0.005 higher at S$0.525 as at 9.42 am on Friday.