SINGAPORE (Oct 18): Sabana REIT’s 3Q16 results saw DPU falling 32.2% year-on-year to $1.20 from $1.77 a year ago.

The fall comes on the back of falling revenue, with a 9.7% drop from $25.4 million in 3Q15 to $23 million in 3Q16. Net Property Income (NPI) fell 24% on year.

NPI took a hit when 34 Penjuru Lane, 23 Serangoon North Avenue 5 and 15 Jalan Kilang Barat were converted into multi-tenanted lease arrangements. This incurred higher property expenses from service, repairs, maintenance, property tax, land rent, utilities and marketing expenses.

NPI was also affected by the non-renewal of 218 Pandan Loop’s triple-net master lease in 4Q15, higher property tax and land rent expenses from 30 & 32 Tuas Avenue 8, 26 Loyang Drive and 21 Joo Koon Crescent as they were converted into non-triple net master lease tenancies in 4Q15.

Higher net impairment losses on trade receivables in 3Q16 over 3Q15 largely arising from the master tenant at 1 Tuas Avenue 4 whose arrears were in excess of the security deposit held also lowered income.

Sabana REIT’s manager says it is currently operates in a challenging business climate, with Singapore’s economy growth forecast to be at 1.8% for the next two years, as well as industrial rents expected to fall 6% to 8% year-on-year.

The REIT is currently in the final stage of negotiations for the renewal of three of the master leases set to expire in 4Q16. The remaining property at 39 Ubi Road 1 has already commenced transition from master-lease to multi-tenanted arrangements.

The manager says it will consider acquisition opportunities for both overseas and local assets with asset enhancement initiatives to grow the REIT’s portfolio. The REIT also signalled its intention to divest underperforming and non-core assets for capital recycling, as well as diversify funding sources.

Units of Sabana REIT closed 0.5 cents lower at 52.5 cents on Monday.

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