Sabana REIT warns of tough market conditions as DPU dips 15%

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Sabana REIT has reported a distribution per unit of 0.75 Singapore cents for its 1Q 2019, 14.8% lower than the previous corresponding quarter.

The REIT’s gross revenue declined 11.8% year-on-year for 1Q 2019, while net property income (NPI) slid by 13.3%.

Sabana REIT has attributed the declines to a challenging market, and its ongoing portfolio optimisation exercise, which includes divestments of non-performing assets.

The REIT also saw reduced rental income from lower occupancies including 151 Lorong Chuan, which saw a significant tenant exiting in 1Q 2019.

The total distributable amount was SGD7.9 million (USD5.8 million), including SGD1.24 million of capital gains from asset divestments.

However, the REIT saw higher contributions from improved occupancies at 508 Chai Chee Lane, and 23 Serangoon North Avenue 5.

Sabana REIT’s overall occupancy was 82.4% as at 31 March 2019, but had 1 Tuas Avenue 4 been divested, the occupancy rate would be at 85.5% instead.

For its plans ahead, Sabana REIT has received permission to add 42,000 square feet of new temporary commercial floor area to its flagship property, New Tech Park.

The property represents approximately one third of the REIT’s overall portfolio asset value, and its refurbishment will be carried out in phases to minimise impact on tenants’ operations, and to the REIT’s performance.

Sabana REIT has warned that overall rent reversion for 2019 is likely to remain negative, given the island-wide oversupply of industrial spaces.

The REIT cited figures from Colliers International, which suggest that annual demand for industrial spaces to moderate to 9.6 million square feet over 2018-2023, while island-wide supply would increase 150% year-on-year in 2019, before tapering off in 2020.

Sabana REIT will focus on active asset management, and progressing on its proposed asset enhancements amid these challenging conditions.

Sabana REIT was last done on the Singapore Exchange at SGD0.42.

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