PARAGON Real Estate Investment Trust’s (Reit) distribution per unit (DPU) for the second half ended December 2023 was down 1.9 per cent on the year to S$0.026 from S$0.0265 previously.

This was despite higher gross revenue which grew 3 per cent to S$145.8 million from S$141.6 million, while net property income (NPI) rose 3.3 per cent to S$109 million from S$105.5 million a year prior.

The latest H2 distribution is expected to be paid on Mar 22, 2024.

It translates to a FY2023 DPU of S$0.0502, which is 9.1 per cent lower than the previous year’s DPU of S$0.0552 based on comparative figures which were prorated in view of Paragon Reit’s change in its financial year-end from Aug 31, 2022, to Dec 31, 2022.

Paragon Reit’s manager on Monday (Feb 5) attributed the lower overall DPU to rising interest cost.

Revenue for the full year was up 1.8 per cent year on year to S$288.9 million from S$283.8 million, while NPI gained 1.7 per cent to S$215.1 million from S$211.5 million in FY2022’s comparative figures.

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As at Dec 31, 2023, the Reit’s portfolio occupancy stood at 98.1 per cent with a weighted average lease expiry (Wale) of 5.1 years by net lettable area and three-year Wale by gross rental income.

Its Singapore portfolio recorded a 2 per cent year-on-year decline in tenant sales for FY2023, which the manager said was “marginal” thanks to low unemployment rates and a resilient labour market, with a recovery in the retail sector supported by the resumption of international travel.

In Australia, tenant sales across the portfolio grew 7 per cent year on year as total retail sales grew 2.8 per cent in New South Wales, and 5.1 per cent in South Australia over the 12-month period.

The manager said retail sector fundamentals in Australia “remained robust due to low unemployment rates, despite inflationary pressures impacting cost of living”. 

The valuation of Paragon Reit’s Singapore assets as at end-2023 were 1.9 per cent or S$62.3 million higher at S$3.4 billion, with capitalisation rates of all of the Reit’s three assets remaining unchanged.

Its assets in Australia, however, experienced a fair valuation decline by 5.6 per cent or A$47.5 million (S$41.5 million) to A$799.5 million as a result of capitalisation rate expansions.

The Reit manager expects “resilient demand and labour market conditions, coupled with the potential upside of an increase in international travel” to support a continued recovery in tenant leasing sentiments and lead to improved performances across its Singapore and Australia assets in FY2024.

Susan Leng, chief executive of the manager, said the Reit’s improved portfolio rental reversion to 6.3 per cent for FY2023 – compared to minus 4.1 per cent for the 16 months ended December 2022 – reflected a stronger demand as well as improved sentiments and outlook from retailers.

“We continue to focus on maximising the value of our quality assets by capitalising on the retail recovery in the form of positive rental reversion, maintaining prudent cost management and adopting innovative technology solutions to streamline our operations.”

Units of Paragon Reit : SK6U 0% ended S$0.03 or 3.5 per cent lower at S$0.84 on Monday, before the announcement.