ESR-Logos Reit reports occupancy growth for assets in Japan, Singapore

THE manager for ESR-Logos Real Estate Investment Trust ( ESR-Logos Reit ) has announced higher occupancy figures for the Reit portfolio’s assets in Tokyo and Singapore.

On Friday (Oct 27), it said the Reit’s ESR Sakura Distribution Centre asset hit 100 per cent occupancy after its existing tenant expanded its space requirement. 

Located in Sakura City in the northern part of the Chiba prefecture in Tokyo, the five-storey modern logistics development was ESR-Logos Reit’s maiden entry into the Japanese logistics market when it was acquired in October 2022.

In Singapore, a new tenant was also secured for 7002 Ang Mo Kio Avenue 5 following its recent asset-enhancement initiative (AEI) completion. This brings occupancy in the multi-tenanted, high-specifications building to about 62 per cent.

Adrian Chui, chief executive of the manager, said the building “continues to demonstrate strong leasing traction”, given its latest occupancy level within two months of obtaining its temporary occupation permit.

While the tenant was not named, the manager referred to it as a “world-leading manufacturer of food service and airline equipment for the aviation industry for over 20 years”.

The tenant’s parent company was described as a “diversified, international conglomerate specialising in brand management, marketing, logistics and travel services”.

DBS Group Research lowered its price target on ESR-Logos Reit to S$0.34 from S$0.38 as it expects divestment, on top of AEI and redevelopment projects, to create an “income void” in the medium term.

While its analysts noted the Reit’s improved balance sheet and successful divestment to date, they estimate that its current 6 per cent exit yield on divestment may deprive it of S$25 million in income a year.

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“Considering this income void on a full-year basis, we anticipate a 4 per cent impact on distribution per unit from FY2024,” they said on Friday.

The analysts also noted that 7.6 per cent of the Reit’s portfolio has a remaining lease of 10 years or less. In their view, this could dampen portfolio valuations by the year-end.

DBS nonetheless remains positive on the Reit’s prospects, as the research house said its upcoming asset-recalibration strategy should be value-accretive to the Reit, and drive its share price re-rating.  

It rates the counter at “buy”, and highlighted an “attractive” dividend yield of more than 10 per cent. 

Units of ESR-Logos Reit were trading flat at S$0.25 as at 10.11 am on Friday, after its latest update.