First Reit posts 6.1% drop in H1 DPU on higher finance costs, one-off increase in unit base

FIRST Reit ’s distribution per unit (DPU) fell 6.1 per cent to S$0.0124 for its first half ended June, from S$0.0132 the year before, even as distributable income rose.

The manager attributed the drop in DPU to higher financing costs, currency translation impact and a one-off increase in the real estate investment trust’s (Reit) unit base, the manager said on Tuesday (Aug 1).

The Reit issued 431.1 million new units in March 2022 to partially fund the acquisition of 12 Japan nursing homes.

Rental and other income for the first half inched up 0.4 per cent on the year to S$54 million from S$53.8 million. This was mainly due to a full half-year rental contribution from the 12 Japan nursing homes and two other Japan nursing homes acquired in September 2022.

First Reit also registered rental income growth across its Singapore and Indonesia portfolios, which include Siloam Hospitals Yogyakarta. However, this was partially offset by the depreciation of the yen and rupiah against the Singapore dollar during the half-year period.

Net property and other income dipped 0.6 per cent on the year to S$52.4 million for the half year, from S$52.7 million as property expenses rose.

The new Japan portfolio prompted a 45.5 per cent year-on-year increase in the Reit’s property operating expenses to S$1.6 million from S$1.1 million.

Finance costs for H1 rose 22.6 per cent to S$11.2 million from S$8.4 million in the previous corresponding period on higher borrowings and interest rate hikes.

Distributable income for the half year amounted to S$25.5 million, up 1 per cent from S$25.3 million in the same period the previous year.

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A DPU of S$0.0062 for the second quarter will be paid out on Sep 25 after book closure on Aug 10. Distributions for Q1, which were also S$0.0062 per unit, were paid on Jun 26.

As at end-June, the Reit’s gearing levels stood at 38.7 per cent, and its weighted average lease expiry was 12 years on a gross floor area basis. The Reit also recorded full committed occupancy.

Nursing homes in Japan and Singapore now comprise more than one-quarter of its assets under management (AUM), said Victor Tan, executive director and chief executive of First Reit’s manager.

“We remain committed towards growing our developed markets portfolio to more than half of the trust’s AUM by FY2027,” he added.

Units of the Reit closed 1.9 per cent or S$0.005 lower at S$0.26 on Monday.