What is the news?
Key takeaways from the quarter
Generally negative reversions across the Industrial REITs, as oversupply condition persists. Even the Data Centre segment was not spared: Keppel DC REIT gave a -8% reversion to a large client at Keppel DC Singapore 2. Exceptions of positive portfolio weighted average rental reversions during the quarter came from Ascendas REIT (+0.9%) with Mapletree Industrial Trust (+0.7%) lagging behind.
As with previous quarters, the situation with tenant retention remains unchanged. REIT Managers continue to focus on tenant retention amid the soft leasing environment. One Manager commented that “it is easier to retain a tenant, than to look for a new one”.
Cache Logistics Trust experienced a downward revaluation for its property at 51 Alps Avenue, triggered by a tenancy contractual dispute. The property was revalued downwards by c.31%, losing 4.0 cents in net asset value (NAV) per Unit and pushing gearing to 41.2% from 39.8%. Other ongoing tenant dispute among the Industrial S-REITs is at Soilbuild Business Space REIT; bearing in mind that the fiscal year-end revaluation for the REIT’s portfolio will be in December. Other obvious candidates for downward revaluation are properties that were converted from a master lease to multi-tenancy lease.
Our “Equal Weight” view on the overall S-REITs sector remains unchanged, and we maintain our “Underweight” view on the Industrial sub-sector.
Cache Logistics Trust – Cautious over the possible overhang of Warehouse space.
Keppel DC REIT – Proxy to explosive growth in data requirements.
Mapletree Industrial Trust – DPU growth from pipeline of build-to-suit (BTS) and asset enhancement initiative (AEI) projects.
Soilbuild Business Space REIT (SBREIT) – Stability from master leases, but weighed down by concerns from Technics Offshore property
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