First Reit H2 DPU falls 6.1% to S$0.0124 on currency depreciation

HEALTHCARE real estate investment trust (Reit) First Reit : AW9U 0% on Tuesday (Feb 20) posted a 6.1 per cent decrease in distribution per unit (DPU) to S$0.0124 for the second half ended Dec 31, 2023, from S$0.0132 in the corresponding year-ago period.

The H2 DPU comprises a Q3 DPU of S$0.0062, which was paid out on Dec 22, 2023, as well as a Q4 DPU of S$0.0062, which will be disbursed on Mar 28.

This brings the Reit’s full-year DPU to S$0.0248, which is lower than the S$0.0264 in FY2022.

The decrease in the full-year DPU was due to a lower distributable income of S$51.4 million. This was down 1.9 per cent from S$52.4 million, coming on the back of higher financing costs and the depreciation of the Indonesian rupiah and Japanese yen against the Singapore dollar.

The fall in FY2023 DPU also took into account a one-off issuance of 431.1 million units in March 2022, to partially fund the acquisition of 12 nursing homes, resulting in an enlarged unit base.

For the second half ended Dec 31, 2023, rental and other income fell 5.1 per cent year on year to S$54.6 million, from S$57.5 million. Net property and other income for the period decreased 5.2 per cent to S$52.9 million, from S$55.8 million.

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Distributable income also declined, shedding 4.5 per cent to S$25.9 million, from S$27.1 million year on year.

For the full year, rental and other income declined 2.4 per cent to S$108.6 million, from S$111.3 million year on year, also due to the currency depreciation. It was partially offset by full-year contributions from Japanese properties that were acquired in March and September 2022.

Net property and other income for the year fell 3 per cent to S$105.3 million, from S$108.6 million in FY2022. This was attributed to full-year property expenses incurred for assets in Japan.

The Reit’s manager noted that the addition of a Japan portfolio resulted in property operating expenses increasing 19.1 per cent to S$3.2 million in FY2023, from S$2.7 million in FY2022.

FY2023 finance costs climbed to S$22.7 million from S$19.4 million a year earlier, due to higher borrowing and interest-rate risk management.

First Reit’s manager said the Reit intends to diversify into developed markets and aims to have more than 50 per cent of its assets under management in such markets by FY2027.

It also intends to reshape the Reit’s portfolio for “capital-efficient growth” by divesting non-core, non-healthcare or mature assets.

“First Reit’s overall financial position remained strong with a gearing of 38.7 per cent and healthy interest coverage ratio at 4.1 times, as at Dec 31, 2023,” said the manager.

As at Dec 31, the Reit’s proportion of debt on fixed rates or hedged stood at 87.2 per cent, up from 59.6 per cent a year ago, to manage volatility in interest rates and currency, it added.

Units of First Reit finished unchanged at S$0.265 on Tuesday, before the results release.