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ESR-LOGOS reports DPU of 0.737 cents for 2QFY2022

Felicia Tan
Felicia Tan • 5 min read
ESR-LOGOS reports DPU of 0.737 cents for 2QFY2022
Artist's impression of the AEI works at 16 Tai Seng Street. Photo: ELOG
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The manager of ESR-LOGOS REIT (E-LOG) has reported a distribution per unit (DPU) of 0.737 cents for the 2QFY2022 ended June.

This brings the REIT’s DPU for the 1HFY2022 to 1.460 cents.

This is the first set of combined financial results released for the period after the completion of the merger between ESR-REIT and ARA LOGOS Logistics Trust (ALOG) in April.

On a y-o-y basis, E-LOG’s DPU stood 6.0% lower y-o-y compared to the DPU of 1.554 cents in the 1HF2021 due to the higher applicable number of units issued.

During the 1HFY2022, E-LOG’s distributable income was spread across 5.04 billion units compared to the 3.65 billion units in the corresponding period the year before. The higher number of units was mainly due to the issuance of new units as part of the scheme consideration paid for the merger, as well as the equity fund raising comprising a private placement and a preferential offering completed in May and August respectively.

For the 1HFY2022, E-LOG’s gross revenue increased by 23.3% y-o-y to $147.7 million mainly due to the contributions from ALOG upon the completion of the merger.

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The REIT’s net property income (NPI) for the half-year period increased by 18.2% y-o-y to $102.8 million, which is mainly attributable to the higher gross revenue but offset by the higher electricity costs on the back of the surge in global energy prices and higher electricity demand.

Consequently, 1HFY2022 distributable income increased by 29.6% y-o-y to $73.6 million, driven by the higher NPI as well as income contributions from E-LOG’s investments in three Australia property funds. The higher distributable income also includes the $3.5 million of tax-exempt income distribution from Viva Trust, a wholly-owned sub-trust of E-LOG.

As at June 30, E-LOG’s portfolio occupancy increased by 0.4 percentage points to 94.1% with a total weighted average lease expiry (WALE) of 3.0 years. In the 1HFY2022, the REIT recorded positive rental reversions of 11.4%. During the same period, a total of 196,035 sqm of space was leased comprising 52,776 sqm of new leases and 143,259 sqm of lease renewals.

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E-LOG’s net asset value (NAV) stood at 36.5 cents per unit as at June 30. Its aggregate leverage ratio for the period stood at 40.6%.

In its statement on July 27, the REIT manager says it has “proactively” taken steps to mitigate the higher property expenses on the back of rising utilities costs and inflationary pressures due to the ongoing macroeconomic and geopolitical situations.

The manager had, during the 2QFY2022, converted a majority of its portfolio utilities cost to SP tariff rates. With effect from July 1, over 90% of the portfolio utilities expense are on a pass-through cost recovery basis.

In addition, the manager says it is also pursuing green strategies for the portfolio, including the adoption of sustainable resources such as renewable energy, as well as the usage of energy efficient technology and equipment.

“Our 1HFY2022 performance reflects our enlarged, well-diversified and quality portfolio which is well-positioned to capture positive rental reversion upside, while mitigating rising utilities and inflationary pressures amidst a volatile interest rate environment with prudent risk management strategies,” says Adrian Chui, CEO and executive director of the manager.

“Our asset enhancement initiatives (AEIs) and redevelopments further position our portfolio to be future-ready as the secular trends and structural growth changes continue,” he adds.

Further to his statement, Chui noted that the “taming of inflationary pressures” will impact the REIT’s growth, “especially business sentiments and consumer confidence, and moderate the robust demand for space needs”, although it’ll still expect “an expansionary demand” for the logistics and general industrial sectors to continue into the short to medium term.

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He continues: “At the same time, given the structural changes in the way goods are produced, delivered and consumed, our portfolio recalibration continues as we pursue opportunities via AEIs/redevelopments, divestment of non-core assets and acquisitions through leveraging on our sponsor, ESR Group’s robust high-quality pipeline of New Economy assets in an increasingly asset scarce environment.”

“Going forward, we will focus on total return upside by propelling E-LOG towards an enhanced growth trajectory through accelerating its exposure to in-demand New Economy and longer land tenure assets to provide rental and NAV upside to our unitholders”, he adds.

A cumulative distribution of 0.910 cents per unit had been paid on June 23; the remaining DPU will be paid on Sept 27.

The REIT, in its statement, announced that it will be changing the frequency of its distributions to a half-yearly basis from a quarterly basis from the 2HFY2022.

In a separate statement, E-LOG announced that it will be commencing AEI works at 16 Tai Seng Street in August.

The AEI will maximise unutilised plot ratio to create an additional 2,793 sqm of space at the property in addition to extensive façade upgrading works.

The development works are estimated to cost approximately $32.0 million, with an estimated yield on cost of up to 6.0%.

The manager has already secured an anchor tenant for the property ahead of the completion of the AEI. The anchor tenant will occupy 2,274 sqm of space, or 12% of the property’s total net leasable area (NLA).

The 10-year lease term includes built-in rental escalations of 2.5% per annum. The property will serve as the tenant’s regional headquarters with warehousing, research and development (R&D) and central kitchen functions.

Units in E-LOG closed at 42 cents on July 26.

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