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ESR-Reit Q2 DPU remains stable at 1.004 S cents

ESR-Reit's distribution per unit (DPU) was stable at 1.004 Singapore cents for its second quarter, up just 0.3 per cent from 1.001 cents a year ago, according to the industrial landlord's Q2 results released on Monday.

This translates to an annualised distribution yield of 7.6 per cent on the back of a more diversified portfolio with lower capital structure risks, said ESR-Reit's manager.

Net property income (NPI) for the three months ended June 30 more than doubled to S$47.8 million from S$23.4 million a year ago. This was largely from the acquisition of 15 Greenwich Drive and the nine properties from Viva Trust’s portfolio following the completion of the merger in October 2018, as well as the leasing up of 30 Marsiling Industrial Estate Road 8 and rental escalations in existing properties.

The increase was partially offset by the lease conversions from single to multi-tenancy for some properties.

Gross revenue rose 95.9 per cent to S$63.8 million from S$32.5 million.

Total amount available for distribution to unitholders rose 102.4 per cent to S$32.1 million from S$15.8 million.

Portfolio occupancy was 91 per cent in the second quarter, above the JTC average of 89.3 per cent, ESR-Reit said.

ESR-Reit renewed and leased approximately 327,700 sq ft of space in the second quarter, reducing the concentration of lease expiries for multi-tenanted buildings from 16 per cent in Q1 to 12.2 per cent in Q2.

During the quarter under review, ESR-Reit acquired PTC Logistics Hub via a joint venture for S$225 million, of which ESR-Reit's acquisition cost was about S$44.4 million. It also completed the divestment of 31 Kian Teck Way for S$5.8 million, a premium of 1.7 per cent to the book value of the property.

The Reit manager launched an equity fund-raising exercise on June 17 to raise gross proceeds of up to S$150 million, to finance the yield-accretive acquisition of PTC Logistics Hub, two accretive asset enhancement initiatives and debt repayment. The private placement of S$100 million was successfully placed on June 18, while details of the preferential offering of new units to raise up to S$50 million will be announced at a later date.

Adrian Chui, chief executive officer and executive director of ESR Funds Management, noted that "ongoing global trade tensions have resulted in increased risk-averse behaviour amongst industrialists on the demand-side in the short tomedium term, and these uncertainties may have started to impact their profitability."

Thus, the Reit manager will need to continue to enhance its portfolio to meet the needs of the "industrialists of tomorrow", and will seek opportunities to optimise the portfolio and reinforce strategies to unlock further value for unitholders while managing ESR-Reit's overall risk profile, Mr Chui said.

ESR units closed unchanged at S$0.535 on Monday, before results were released.