AIMS AMP Capital Industrial REITs Management Limited (the Manager) as manager of AIMS AMP Capital Industrial REIT (AA REITs) on 1 Feb in Singapore announced a 2.7 per cent increase in Distribution Per Unit (DPU) from the preceding quarter to 2.62 cents for the quarter ended 31 December 2017 (3Q FY2018).
The third quarter DPU of 2.62 cents comprised (i) an advanced distribution of 1.91 cents per unit for the period from 1 October 2017 to 30 November 2017 which was paid on 17 January 2018 and (ii) a distribution of 0.71 cents per unit for the period from 1 December 2017 to 31 December 2017 to be paid on 22 March 2018.
The Manager’s Chief Executive Officer, Koh Wee Lih said, “We are pleased to continue to drive stable returns for our Unitholders. We remain focused on active asset and lease management to future-proof the REIT, while navigating the soft market conditions. As part of this strategy, we are constantly evaluating our assets and identifying opportunities to build a higher quality portfolio and unlock further value for our unitholders.”
During the quarter, the Manager successfully executed 29 new and renewal leases, representing 71,561.8 sqm (10.9 per cent of total net lettable area). Portfolio occupancy is at 88.4 per cent as at 31 December 2017.
AA REIT’s redevelopment at 8 Tuas Avenue 20 which achieved its Temporary Occupation Permit (TOP) on 29 August 2017 is now 83.7 per cent occupied.
Meanwhile, rental income will commence in the first quarter of FY2019 for AA REIT’s completed greenfield build-to-suit development at 51 Marsiling Road.
In line with AA REIT’s capital recycling strategy, the Manager recently announced the divestment of its smallest property at 10 Soon Lee Road for S$8.17 million, at an approximate 28 per cent premium over the property’s latest valuation of S$6.4 million1.
Mr Koh added, “To support the strategy, AA REIT will also continue to prudently manage capital and risks to optimise returns for our investors.”
During the quarter, AA REIT successfully raised gross proceeds of approximately S$55 million through a private placement. The proceeds were used to repay AA REIT’s existing borrowings to reduce aggregate leverage and create additional debt headroom for future potential acquisitions, asset enhancement initiatives and/or other development opportunities that may be identified by the Manager as well as for the balance payments on AA REIT’s recent development projects. AA REIT’s aggregate leverage fell from 37.3 per cent as at 30 September 2017 to 33.8 per cent as at 31 December 2017 following the private placement.
As at 31 December 2017, AA REIT’s weighted average debt maturity is at 2.1 years with no debt due for refinancing until November 2018. 88.7 per cent of AA REIT’s borrowings were on fixed rates taking into account the interest rate swaps and fixed rate notes. Overall blended funding cost (including funding of the Australian asset with Australian dollar loan) is at 3.6 per cent.
Key operational highlights for 3Q FY2018 are:
For the third quarter of FY2018, the Manager achieved the following financial performance metrics:
Outlook
The MTI expected the economy to grow by 3 per cent to 3.5 per cent in 2017 and by 1.5 per cent to 3.5 per cent in 2018. Alongside an electronics surge and external growth, the property sector was ranked among the top three upside factors for the economy in 2018 according to the Monetary Authority of Singapore’s Survey of Professional Forecasters.
However, UOB economist highlighted that 2018 is certainly more optimistic but caution remains due to some risk factors that could be potential headwinds for economic growth.
These includes slowdown in China’s investment, current high US equity valuations and the higher interest rates in the US from the continuation of the interest rate normalisation may result in negative wealth effects should there be a sharp pullback in the asset markets and potential risk of tax hike in the Goods & Services tax in Singapore resulting in a dampening effect on 2018 economic growth and generating higher inflation.
In Singapore, the industrial oversupply situation will continue into 2018 that may continue to put downward pressure on rentals and occupancy.
AA REITs remains focused on active asset and lease management, and unlocking organic value within the portfolio through asset enhancement initiatives and redevelopments. AA REITs has completed the development project at 51 Marsiling Road which achieved its TOP on 27 October 2017 with rental income commencing in first quarter FY2019. The Group’s weighted average debt maturity is at 2.1 years as at 31 December 2017 with no debt due for refinancing until November 2018. Furthermore, 88.7 per cent of the Group’s borrowings were on fixed rates taking into account the interest rate swaps and fixed rate notes. AA REITs will continue to remain focused on managing risks through prudent capital management and to optimise the portfolio through sector and tenant diversification across its portfolio of 27 industrial properties.
The third quarter DPU of 2.62 cents comprised (i) an advanced distribution of 1.91 cents per unit for the period from 1 October 2017 to 30 November 2017 which was paid on 17 January 2018 and (ii) a distribution of 0.71 cents per unit for the period from 1 December 2017 to 31 December 2017 to be paid on 22 March 2018.
The Manager’s Chief Executive Officer, Koh Wee Lih said, “We are pleased to continue to drive stable returns for our Unitholders. We remain focused on active asset and lease management to future-proof the REIT, while navigating the soft market conditions. As part of this strategy, we are constantly evaluating our assets and identifying opportunities to build a higher quality portfolio and unlock further value for our unitholders.”
During the quarter, the Manager successfully executed 29 new and renewal leases, representing 71,561.8 sqm (10.9 per cent of total net lettable area). Portfolio occupancy is at 88.4 per cent as at 31 December 2017.
AA REIT’s redevelopment at 8 Tuas Avenue 20 which achieved its Temporary Occupation Permit (TOP) on 29 August 2017 is now 83.7 per cent occupied.
Meanwhile, rental income will commence in the first quarter of FY2019 for AA REIT’s completed greenfield build-to-suit development at 51 Marsiling Road.
In line with AA REIT’s capital recycling strategy, the Manager recently announced the divestment of its smallest property at 10 Soon Lee Road for S$8.17 million, at an approximate 28 per cent premium over the property’s latest valuation of S$6.4 million1.
Mr Koh added, “To support the strategy, AA REIT will also continue to prudently manage capital and risks to optimise returns for our investors.”
During the quarter, AA REIT successfully raised gross proceeds of approximately S$55 million through a private placement. The proceeds were used to repay AA REIT’s existing borrowings to reduce aggregate leverage and create additional debt headroom for future potential acquisitions, asset enhancement initiatives and/or other development opportunities that may be identified by the Manager as well as for the balance payments on AA REIT’s recent development projects. AA REIT’s aggregate leverage fell from 37.3 per cent as at 30 September 2017 to 33.8 per cent as at 31 December 2017 following the private placement.
As at 31 December 2017, AA REIT’s weighted average debt maturity is at 2.1 years with no debt due for refinancing until November 2018. 88.7 per cent of AA REIT’s borrowings were on fixed rates taking into account the interest rate swaps and fixed rate notes. Overall blended funding cost (including funding of the Australian asset with Australian dollar loan) is at 3.6 per cent.
Key operational highlights for 3Q FY2018 are:
- Delivered DPU of 2.62 cents for the quarter (2.7 per cent increase from the preceding quarter);
- Portfolio occupancy of 88.4 per cent as at 31 December 2017;
- Executed 29 new and renewal leases in 3Q FY2018, representing 71,561.8 sqm (10.9 per cent of total net lettable area);
- AA REIT’s redevelopment at 8 Tuas Avenue 20 which achieved its TOP on 29 August 2017 is now 83.7 per cent occupied (up from 43.4 per cent a quarter ago);
- 51 Marsiling Road, AA REIT’s first greenfield build-to-suit development which received its TOP on 27 October 2017 has been fully leased to manufacturer, Beyonics International Pte Ltd for a term of 10 years with rent escalations. Rental income will commence in first quarter of FY2019;
- As part of AA REIT’s capital recycling strategy, AA REIT announced the divestment of its smallest asset – 10 Soon Lee Road for S$8.17 million (28 per cent premium over latest valuation of S$6.4 million1 ).
For the third quarter of FY2018, the Manager achieved the following financial performance metrics:
- 88.7 per cent of the portfolio’s interest rate is fixed taking into account interest rate swaps and fixed rate notes;
- Overall blended funding cost (including funding of the Australian asset with Australian dollar loan) of 3.6 per cent;
- Successfully raised gross proceeds of approximately S$55 million through a private placement. The proceeds were used to repay AA REIT’s existing borrowings to reduce aggregate leverage and create additional debt headroom for future potential acquisitions, asset enhancement initiatives and/or other development opportunities that may be identified by the Manager as well as for the balance payments on AA REIT’s recent development projects;
- Aggregate leverage as at 31 December 2017 is at 33.8 per cent;
- Weighted average debt maturity of 2.1 years with no debt due for refinancing until November 2018.
Outlook
The MTI expected the economy to grow by 3 per cent to 3.5 per cent in 2017 and by 1.5 per cent to 3.5 per cent in 2018. Alongside an electronics surge and external growth, the property sector was ranked among the top three upside factors for the economy in 2018 according to the Monetary Authority of Singapore’s Survey of Professional Forecasters.
However, UOB economist highlighted that 2018 is certainly more optimistic but caution remains due to some risk factors that could be potential headwinds for economic growth.
These includes slowdown in China’s investment, current high US equity valuations and the higher interest rates in the US from the continuation of the interest rate normalisation may result in negative wealth effects should there be a sharp pullback in the asset markets and potential risk of tax hike in the Goods & Services tax in Singapore resulting in a dampening effect on 2018 economic growth and generating higher inflation.
In Singapore, the industrial oversupply situation will continue into 2018 that may continue to put downward pressure on rentals and occupancy.
AA REITs remains focused on active asset and lease management, and unlocking organic value within the portfolio through asset enhancement initiatives and redevelopments. AA REITs has completed the development project at 51 Marsiling Road which achieved its TOP on 27 October 2017 with rental income commencing in first quarter FY2019. The Group’s weighted average debt maturity is at 2.1 years as at 31 December 2017 with no debt due for refinancing until November 2018. Furthermore, 88.7 per cent of the Group’s borrowings were on fixed rates taking into account the interest rate swaps and fixed rate notes. AA REITs will continue to remain focused on managing risks through prudent capital management and to optimise the portfolio through sector and tenant diversification across its portfolio of 27 industrial properties.
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