Stock.i1: AIMS APAC REIT

AIMS APAC REIT has released its 1H FY2022 result on 13 October 2021. In this article, we will be looking at the highlights of their results and the management outlook for the REIT.

About AIMS APAC REIT

AIMS APAC REIT (“AA REIT”) was established with the principal investment objective of owning and investing in a diversified portfolio of income-producing industrial, logistics and business park real estate, located throughout the Asia Pacific region.

The real estate assets are utilised for a variety of purposes, including but not limited to warehousing and distribution activities, business park activities and manufacturing activities. AA REIT’s existing portfolio consists of 28 properties, of which 26 properties are located throughout Singapore, a property located in Gold Coast, Queensland, Australia and a 49.0% interest in one business park property, Optus Centre, which is located in Macquarie Park, New South Wales, Australia.

1H FY2022 Result Highlights

For 1H FY2022, AA REIT’s gross revenue grew by a modest rate of 13% year-on-year to S$65.24 million. This was mainly attributable to the rental contribution from the property located at 7 Bulim Street, and higher gross revenue from 20 Gul Way, 8 & 10 Pandan Crescent and 541 Yishun Industrial Park A.

Meanwhile, net property income for 1H FY2022 edged up by close to 20% year-on-year to S$47.70 million due to the above mentioned reasons.

As a result, distribution per unit ("DPU") increased by 18.8% year-on-year to 4.75 cents. Taking into account the past 2 quarters DPU of 4.95 cents and share price of S$1.51, the indicative distribution yield comes up to 6.4%.

Capital Management

As at 30 September 2021, AA REIT’s total assets grew to nearly S$2 billion. The higher amount was contributed by the growth in its cash and cash equivalents in the quarter, mainly due to the issuance of S$250 million worth of perpetual securities.

However, the cash raised from the issuance was partially offset by the repayment of borrowings and the initial deposit payment for the acquisition of 1 Woolworths Way, Bella Vista, New South Wales, Australia.

With the decline in total borrowing and issuance of perpetual securities, AA REIT’s aggregate leverage dipped to just 24.7%, which is well below the stipulated maximum aggregate leverage of 50% by Monetary Authority of Singapore (“MAS”).

Portfolio Occupancy & Lease Expiry Profile

For 1H FY2022, AA REIT’s overall portfolio occupancy rate came in at a remarkable level of 97.3%, as compared to JTC’s figure of just 90.1% for 2Q 2021.

Breaking the figure down by industry, both the Warehouse & Industrial outperformed significantly in the financial period, with an occupancy rate of 98.1% and 97.5% respectively. Both figures also exceeded AA REIT’s overall occupancy rate, which reflects the demand and strength in the industry.

In terms of AA REIT’s lease expiry profile, 13.8% & 17.2% of the lease expiry by gross rental income for FY2022 and FY2023 will be due for renewal. The next major hurdle for AA REIT will be in FY2024, where 25.3% of the total lease expiry by gross rental income will be due for renewal.

Tenant Base

Looking at AA REIT’s tenant base by gross rental income, majority of its tenants can be classified under 4 big industries, mainly:

• Logistics (35.7%)
• Telecommunications (14.7%)
• Engineering (11.9%)
• Bio-Tech/Life Sciences (7.7%)

On the other hand, the largest tenant by gross rental income for AA REIT belongs to Optus, which is an Australian telecommunications company headquartered in New South Wales, Australia. It is a wholly owned subsidiary of Singtel (SGX: Z74).

Meanwhile, its second largest tenant belongs to illumina, Inc., which develops, manufactures, and market integrated systems for the analysis of genetic variation and biological function.

Lastly, its third largest tenant belongs to Kintetsu World Express (“KWE”), Inc., which is a major Japanese freight forwarding company.

Latest Acquisition - Woolworths HQ

On 30 September 2021, AA REIT has announced the proposed acquisition of Woolworths HQ for a purchase consideration of A$463.25 million (approximately S$454.0 million).

The property, which is fully leased to Woolworths Group Limited, will be acquired at an initial net property income (“NPI”) yield of 5.17%. The lease is subject to a balance lease term of 10 years and rental escalation of 2.75% per annum.

With this acquisition, AA REIT will be able to expand its footprint in Australia, as majority of its current rental income are still generated predominantly in Singapore. Furthermore, with the annual rent escalation and existing tenant in place, this will provide AA REIT with long-term income stability and growth.

Management Outlook

In terms of management outlook, AA REIT mentioned that despite the uncertainties in the global pandemic, the Singapore and Australian economies both reported stronger than expected recovery.

On top of that, factors such as rising rentals and prices of industrial space underpinned by the manufacturing sector, and business park demand driven by office de-centralisation have continued to reinforce the resilience of the industrial sector. Manufacturing firms are also anticipating favourable business sentiments to continue into the last quarter of the year.

In Australia, the industrial and logistics sector remained resilient, underpinned by strong e-commerce growth and demand from occupiers in the transport and manufacturing industries, while quality business parks with good connectivity are well-positioned to attract future office occupiers.

Finally, amidst the current macroeconomic environment, AA REIT will continue to proactively manage its portfolio to deliver sustainable distributions and create long-term value for Unitholders.

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