ESR-REIT: Asset recycling improved credit metric September 8, 2026 3

  • Gross revenue and NPI declined 0.3% and 2.2% YoY to S$222.3mn and S$162.7mn, respectively, mainly due to lost income from the divestment of 10 non-core properties. Excluding these assets, same-store NPI rose 0.7% YoY to S$155.1mn, supported by 9.8% positive rental reversions and higher rents from new leases.
  • Aggregate leverage declined to 41.4% as divestment proceeds were used to repay borrowings, while ICR improved to 2.6x, supported by lower debt outstanding and lower base rates. Management guided for gearing to decline further to 39.9% following the redemption of S$125mn of unsecured notes using remaining divestment proceeds.
  • We are positive on ESR-REIT’s credit profile, supported by resilient underlying performance and improved credit metrics. Funding flexibility is underpinned by c.S$284mn of committed undrawn RCFs and 69.5% unencumbered investment properties. The key watchpoint is leverage following the proposed Melbourne acquisition.

 

 

 

 

 

 

 

 

 

Credit Performance Highlights
• Underlying portfolio performance remains resilient. Gross revenue and NPI declined
0.3% and 2.2% YoY to S$222.3mn and S$162.7mn, respectively, mainly due to income
losses following the divestment 10 non-core Singapore assets, comprising mainly
industrial properties and the hotel strata at ESR BizPark @ Changi. Excluding these assets,
same-store NPI rose 0.7% YoY to S$155.1mn from S$154.1mn. Growth was supported by
positive rental reversions of 9.8% (1H25: 9.7%) and higher rental rates from new leases,
partly offset by higher utilities and property tax.
• Credit metric improved following debt repayment. Aggregate leverage declined to
41.6% (1H25: 42.6%) as proceeds from divestments were used to repay borrowings.
Gross debt declined to S$2.02bn (1H25: S$2.2bn), improving debt headroom to
S$871.4mn (1H25: S$792mn). However, on our more conservative basis, treating the
S$456mn of perpetual securities as debt, adjusted leverage remains elevated at 50.8%.
ICR improved to 2.6x (1H25:2.4x), supported by lower borrowing costs from reduced debt
outstanding and lower base rates. Management expected gearing to decline further to
39.9% following the redemption of S$125mn unsecured notes using remaining
divestment proceeds
• AEIs and portfolio recycling improve asset quality. ESR-REIT completed AEIs at 16 and
29 Tai Seng, upgrading both assets to higher-specification industrial space. It has also divested non-core Singapore properties with shorter remaining land tenure of c.22.4
years and older building specifications, while redeploying capital into six modern freehold
logistics properties in Melbourne. Following the proposed acquisition in Melbourne and
divestment of 12 Ang Mo Kio Street 65, freehold exposure is expected to increase from
19.8% to 25.1%, while weighted-average land tenure improves from 44.7 years to 48.4
years, resulting in a longer-tenure portfolio with lower lease-decay risk.

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About the author

Profile photo of Tan Tze Yi

Tan Tze Yi
Fixed Income Analyst
Phillip Capital Malaysia

Fixed Income and Credit Analyst at Phillip Capital, where she focuses on research across Singapore credit markets. She has a keen interest in credit valuation and market trends, and aims to provide clear, practical insights to support investors’ decisions.

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