On 19 July 2023, Sabana Industrial REIT release its 1H 2023 report card, with many positive items on the list but only one uncertainty ahead!
Let's jump right in and take a look at some of the main positives!
Positive 1 - Portfolio Occupancy Reaches its Multi-Year High
As of June 30, 2023, the properties had consistent or better occupancy rates compared to December 31, 2022.
The company also benefited from high demand for warehouse and logistics properties, which made up 16.6% of its gross rental income during the first half of 2023, an increase from 13.8% in the previous year.
Furthermore, tenants in the Electronics and Logistics as well as Supply Chain Management trade sectors experienced significant growth during the first half of 2023. The various factors mentioned contribute to keeping the portfolio occupancy growing steadily.
Positive 2 - Achieved Record Rental Reversion
Sabana REIT managed to increase their rental income significantly by 27.1% in the second quarter and 20.1% in the first half of 2023, which are among the highest in S-REIT. This comes after two years of strong rental growth in 2021 and 2022!
Source: https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
Positive 3 - Comfortable Gearing Ratio
The REIT is sustaining its gearing ratio at a very comfortable consistency. Currently, it is sitting at 32.5%.
Source: https://www.ustreasuryyieldcurve.com/
Positive 4 - No Refinancing of Debt required until 4Q 2025
The REIT does not need to refinance their debt until late 2025, avoiding higher interest rates. Additionally, in June 2023, they obtained an unsecured loan and credit facilities of up to $100 million for sustainable projects.
Positive 5 - High % of Loan on Fixed Rates
The REIT has 82.2% of its loans on fixed interest rates.
Note: If interest rates rise by 0.20%, it may lead to a $0.10 million decrease in distributable income, equivalent to a 0.3% reduction (around 0.01 cents) in DPU per year.
Source: MAS, CPF, MSI, POSB, ssga.com (17 July 2023)
Important Event coming up on 7 Aug 2023!
Quarz Capital requested a special meeting called an Extraordinary General Meeting (EGM). Unit-holders will vote on two decisions
- whether to replace the current Reit manager, Sabana Industrial Real Estate Investment Management
- whether to bring the management function of Sabana Industrial Reit in-house.
Even though the current REIT Management team has done a lot of good, we are now unsure about the future because of this resolution.
Wrapping Up
Sabana Industrial REIT has come a long way and provided unit holders value throughout the years due to the current team. Until the resolution session is concluded, this will be one item we will have to monitor.
The present Chief Executive of Sabina Industrial Real Estate Investment Manager (SREIM), Donald Han, also mentioned that he cannot assure that the current staff will remain in the event that the EGM resolution is approved.
This is the one issue for investors to keep in mind!
Always invest wisely and carefully by considering the REIT's fundamentals before making any investment!