ESR-REIT : J91U 0%’S distribution per unit (DPU) fell 9.6 per cent to S$0.00723 for its first quarter ended Mar 31 2022, from S$0.008 a year ago.

This is due to an enlarged unit base as a result of the issuance of new units following ESR-Reit’s equity fundraising. 

Gross revenue was down 1.2 per cent to S$59.6 million for the quarter, from S$60.3 million a year ago. 

Net property income (NPI) fell 10.4 per cent on the year to S$39.5 million for the quarter, from S$44.1 million.

This was due primarily to higher property expenses as a result of surges in utilities costs attributed to the increase in global energy prices and higher electricity demand, which is expected to continue, its manager said in a regulatory filing on Wednesday (Apr 27).

Distributable income increased 2.1 per cent year on year to S$29.3 million, from S$28.7 million, due to lower borrowing costs, contributions from the Reit’s 10 per cent interest in ESR Australia Logistics Partnership and a non-recurrent tax-exempt income distribution from Viva Industrial Trust.

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Portfolio rental reversion for Q1 2022 recorded an increase of 3.1 per cent, with logistics/warehouse, general industrial and business park sectors registering robust positive rental reversions, offset by negative rental reversions in the business park retail space as the workforce gradually returns.

Portfolio occupancy rate remained steady at 91.5 per cent, while tenant retention rate in Q1 2022 was 75.6 per cent, the manager said.

The weighted average lease expiry as at Mar 31 2022 remained at 2.5 years.

Adrian Chui, chief executive officer and executive director of the Reit’s manager, said that while the global energy crisis and rising inflation have increased utilities and maintenance expenses, the industrial market is seeing a healthy demand from the logistics and general industrial sectors due to an acute shortage of quality space, as reflected in the positive rental reversions recorded for the quarter.

“Given the external headwinds, we expect utilities costs to remain high in the near term, impacting net property income. We are keeping a close eye and taking proactive steps to manage these surges in utilities costs and inflationary pressures.”

The Reit’s merger with ARA Logos Logistics Trust will be completed on Apr 28. The Reit will be renamed ESR-Logos Reit and comprise S$5.4 billion of total assets.

With a larger and more diversified portfolio, ESR-Logos Reit will look to leverage its sponsor, ESR Group’s fully integrated development and investment management platform as well as its global tenant network to attract and retain value tenants, said Chui, adding that the Reit will also identify and improve economies of scale in managing property expenses.

The S$0.00723 DPU for the period from Jan 1 2022 to Mar 31 2022 will be paid together with the clean-up distribution of S$0.00187 for the period from Apr 1 2022 to Apr 21 2022, in connection with the merger. 

The record date for the cumulative distribution totalling S$0.0091 per unit was on Apr 21, 2022 and the expected payment date is Jun 23.

Units of ESR-Reit were trading flat at S$0.42 as at 10.15 am on Wednesday.