Industrial S-Reits confident on resiliency

DESPITE challenges in the global economy brought about by the Covid-19 pandemic over the past 18 months, Industrial Reits, among Reit sub-segments, have remained one of more resilient and relatively sheltered Reit sectors.

Globally in 2020, Industrial Reits were the second best performing after Specialised Reits, having generated 8.9 per cent median total returns. This segment's resilient performance was seen in the year to date with 17.9 per cent median total returns and was among the top three best performing Reit sub-segments.

In Singapore, Industrial S-Reits were also one of the best performing sub-segments after Specialised and Healthcare S-Reits in 2020 and in the year to date.

Industrial S-Reits returned 20.9 per cent on average in the year-to-date. The five with highest returns in the year to date are ARA Logos Logistics Trust K2LU (49.9 per cent), Aims Apac Reit O5RU (40.3 per cent), EC World Reit BWCU (34.8 per cent), Sabana Reit M1GU (25.5 per cent), and ESR-Reit J91U : J91U 0% (24.0 per cent).

There are eight Industrial S-Reits listed in Singapore with a combined market capitalisation of S$33 billion, forming the second largest sub-segment of the local Reit market by market capitalisation.

The sub-sector's resilience may be due to its nature where property is tenanted to light industrial production, manufacturing, distribution and storage, business parks and other businesses.

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E-commerce, transportation and logistics, and work-from-home are some trends that continue to remain in play in the pandemic. Industrial S-Reits have attracted over S$315 million in net retail investor fund inflows in the year-to-date.

ARA Logos Logistics Trust announced that its gross revenue and net property income (NPI) for H1 FY2021 rose by 15.2 per cent and 17.1 per cent year on year respectively, underpinned by incremental revenue generated from its recently completed Australian property portfolio acquisition, stronger portfolio performance and appreciation of the Australian dollar.

Its H1 FY2021 distribution per unit (DPU) grew 10.6 per cent year on year to 2.570 cents and it believes that the logistics sector will continue to demonstrate its resilience despite the challenging economic climate.

Aims Apac Reit's gross revenue and NPI grew 16.8 per cent and 23.9 per cent year on year respectively in Q1 FY2022, mainly contributed by its recently acquired property at 7 Bulim Street, and higher rentals from two other properties. The Reit noted that its asset and tenant diversity has served it well during the quarter and has observed high resiliency across its portfolio which has placed them well in lease renewal negotiations.

Sabana Reit reported improved NPI by 23.2 per cent year on year on higher occupancy and DPU rising 214.9 per cent to 1.48 cents for H1 2021.

The Reit's portfolio occupancy improved to 83.4 per cent in H1 2021, from 76.5 per cent in December 2020.

The Reit recently announced the removal of the Shari'ah compliance requirement to accommodate the changing profile of tenants and enhance flexibility in positioning for the next phase of growth

It expects the change to enhance its balance sheet resilience by providing access to more funding sources, allow for a larger pool of diversified tenants from F&B and retail sectors, and provide cost savings in the long-run. SGX RESEARCH

• For more research and information on Singapore's Reit sector, visit sgx.com/research-education/sectors for the monthly S-Reits & Property Trusts Chartbook.

• Source: SGX Research S-Reits & Property Trusts Chartbook.