ESR-Reit H1 DPU up 2.4% at S$0.1151 on active capital recycling, robust reversions

[SINGAPORE] The total distribution per unit (DPU) of ESR-Reit for the first half-year grew 2.4 per cent to S$0.1151 from S$0.11239 in the corresponding year-ago period.

Core DPU rose 4.5 per cent year on year to S$0.1125 for H1 ended Jun 30, supported by lower borrowing costs and resilient underlying asset performance. Core DPU accounted for about 98 per cent of total DPU.

The distribution will be paid out on Sep 11.

Revenue for the half-year dropped 0.3 per cent to S$222.3 million from S$222.9 million a year earlier, while net property income (NPI) fell 2.2 per cent to S$162.7 million from S$166.3 million.

The manager said the lower top-line figures were mainly due to the loss of income following the divestment of 10 non-core properties across the 2025 financial year and the first half of 2026.

On a same-store basis, revenue and NPI expanded 2.3 per cent and 0.7 per cent year on year, respectively, driven by positive rental reversions and higher rental rates from new leases.

Total amount available for distribution to unitholders rose 3.2 per cent to S$93 million in H1 2026, compared with S$90.1 million in H1 2025.

Portfolio rental reversions came in at a positive 9.8 per cent for the period, led by strength in the logistics and high-specifications industrial sectors.

Overall portfolio occupancy stood at 91.9 per cent as at Jun 30, up from 91.2 per cent a year earlier, while weighted average lease expiry lengthened to 4.8 years from 4.1 years.

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Adrian Chui, CEO and executive director of the manager, said the real estate investment trust (Reit) delivered resilient performance despite the earnings impact from non-core asset divestments.

“The successful divestment of non-core assets unlocked value and facilitated the timely recycling of the sale proceeds into six freehold institutional-grade logistics properties in Australia,” he said.

ESR-Reit earlier announced the proposed acquisition of six freehold logistics assets in Melbourne, Australia, for a net purchase consideration of A$329.3 million (US$230 million), which is expected to be 5.1 per cent DPU accretive on a pro forma basis.

At a media briefing, Chui said ESR-Reit was funding the purchase with Singapore dollar borrowings rather than Australian debt, a strategy that he acknowledged was, in effect, a carry trade.

He said the manager opted for cheaper Singapore dollar funding instead of Australian debt. Borrowing in Singapore dollars was not only less expensive but also unsecured, he added, whereas Australian banks would require the Reit to pledge or mortgage its assets.

The Reit would later enter into cross-currency swaps to convert the borrowing into effectively an Australian loan, Chui said, once interest rates there moved in the Reit’s favour.

The manager had flagged in April that rising Australian interest rates risked narrowing the spread between capitalisation rates and debt costs. Chui confirmed that spread remained thin.

Even so, he said the purchase was not the start of a buying spree. Australia, Japan and Singapore would remain the Reit’s core markets, with its Australian focus kept to Melbourne, Sydney and Brisbane, where it already holds assets.

He said the manager preferred scalable core cities instead of spreading capital across smaller markets.

This follows the completion of divestments comprising eight non-core Singapore assets for S$338.1 million and a hotel strata lot at ESR BizPark @ Changi for S$101 million during the first half.

On Tuesday (Jul 28), the Reit also entered into an agreement to divest 12 Ang Mo Kio Street 65 for S$33.3 million.

As at Jun 30, 2026, gearing stood at 41.4 per cent, down from 43.4 per cent as at end-December 2025. It is expected to improve further to 39.9 per cent after redeeming S$125 million of unsecured notes maturing in August 2026 using balance proceeds from divestments.

Weighted average all-in cost of debt increased to 3.52 per cent per annum, while interest coverage ratio stood at 2.6 times.

Net asset value per unit slipped to S$2.50 as at Jun 30, 2026, from S$2.55 as at Dec 31, 2025.

Units of ESR-Reit closed 1.2 per cent or S$0.03 higher at S$2.48 on Monday.