In results released on the evening 15 October, Singapore-listed Shari'ah compliant industrial REIT Sabana (SGX:M1GU) revealed that it will be paying a distribution per unit (DPU) of 1.81 Singapore cents for the financial period of July 2014 to 30 September 2014 (3Q 2014).

This represents a drop of 23.9% as compared to the 2.38 Singapore cents paid out in the corresponding period of 2013. Accordingly net property income (NPI) and income available for distribution dipped 9.8% and 18.4% respectively year-on-year.

However gross revenue for the period grew by 16.3% reporting in at SGD25.126 million as compared to the SGD21.598 million compared to a year ago. The REIT has attributed this growth in revenue mainly to the contribution from 508 Chai Chee Lane, which was acquired on 26 September 2013, and higher gross revenue from 151 Lorong Chuan, which was converted into multi‐tenanted lease arrangement in the fourth quarter of 2013.

Sabana REIT highlighted that its property expenses for the period increased by 342.4% as compared to 3Q 2013 due to higher property tax, maintenance, utilities, marketing, lease and administrative expenses and land rent expenses. The REIT has also increased the number of directly managed multi‐tenanted properties from two in 3Q 2013 to six in 3Q 2014, further drumming up these costs.

Sabana also pointed to the fact that lease management fees are now also being charged to the 15 properties acquired during IPO following the expiry of the three‐year waiver period in 4Q 2013.

However Sabana REIT highlighted that its overall portfolio occupancy level has improved in 3Q 2014 and was at 91.8%, compared to 90.8% in 2Q 2014.

For 4Q 2014, Sabana REIT will have three master leases expiring. The REIT has indicated that its manager is currently in the process of signing new master leases for two of the three properties. The remaining property will be converted into a multi‐tenanted property.

As at 30 September 2014, Sabana REIT had outstanding borrowings of SGD455.8 million, of which 91% was effectively fixed. Sabana REIT’s total weighted average tenor of borrowings stood at 2.3 years, with aggregate leverage at approximately 37%.

Sabana REIT said that it anticipates market conditions to remain challenging and intends to maintain aggregate leverage below 40%. “Industrial property market was relatively more subdued in 3Q 2014 compared to 2Q 2014, with sales of strata‐titled industrial properties easing by approximately 36% compared to 2Q 2014”, the REIT said in an official statement.

For the quarters ahead, the REIT has indicated that it will be embarking on aggressive marketing and leasing efforts to increase its portfolio occupancy while evaluating potential yield‐accretive acquisition opportunities on top of exploring opportunities to divest underperforming assets to recycle capital.

Distribution for the period will be paid to unitholders on 28 November. Units of Sabana REIT are currently listed on the Singapore Exchange at SGD1.00.

Sabana REIT has described conditions ahead as challenging after posting a 24% drop in DPU for 3Q 2014.
Sabana REIT has described conditions ahead as challenging after posting a 24% drop in DPU for 3Q 2014.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.