Sabana Industrial Real Estate Investment Trust (REIT) has reported a stellar performance for FY 2024, achieving record-breaking results despite ongoing challenges from its internalisation process. With strong financial metrics, sustainable initiatives, and robust rental growth, the REIT has set the stage for a transformative year ahead. However, shareholders should remain cautious as lingering uncertainties could impact future performance.

Key Financial Highlights

• Gross Revenue: Reached an all-time high of S\$113.3 million for FY 2024, up 1.3% year-on-year (y-o-y).
• Net Property Income (NPI): Increased to S\$57.5 million, a 4.5% y-o-y growth, driven by strong positive rental reversions and lower property expenses.
• Distribution Per Unit (DPU): Declared DPU for FY 2024 rose by 3.6% y-o-y to 2.86 cents. This figure could have been higher at 3.15 cents if not for the 10% retention of distributable income for internalisation-related costs.
• Rental Reversion: Achieved a four-year high with an overall positive rental reversion of 20.6% for FY 2024.

Internalisation Process

The REIT’s ongoing internalisation efforts remain a key focus area. Approximately 10% of distributable income for FY 2024 was retained to fund internalisation costs, amounting to S\$11.39 million in cumulative expenses by the end of 2024. While this strategic move aims to enhance long-term stability, it has temporarily impacted short-term returns. Further retention of distributable income may be required in FY 2025, potentially impacting unitholder distributions.

Sustainability Milestones

Sabana Industrial REIT has made significant strides in sustainability, positioning itself as a leader in green initiatives:

• The transformation of Sabana@1TA4 earned it the prestigious BCA Green Mark Super Low Energy certification.
• Rooftop solar panels have been installed across nine properties, enabling potential annual energy generation of over 8,400 megawatt-hours.
• The REIT aims to achieve carbon neutrality by 2040, marking a pioneering step in the industrial REIT sector.
• Recognised with an ‘A’ score by the Global Real Estate Sustainability Benchmark (GRESB) and improved its Singapore Governance and Transparency Index (SGTI) ranking, climbing six positions to 24th place.

Operational Challenges and Portfolio Updates

Despite achieving strong financial metrics, the REIT faced operational challenges:

• Portfolio occupancy fell to 85.0% as of 31 December 2024, primarily due to repossessions of key assets.
• The weighted average lease expiry (WALE) by gross rental income stands at 2.6 years, with land leases averaging 26.4 years by gross floor area.
• The REIT’s portfolio valuation increased marginally to S\$915.9 million, boosted by a land premium payment for a lease tenure extension.

Capital Management and Debt Highlights

Sabana Industrial REIT demonstrated prudent capital management despite rising costs and interest rates:

• Aggregate Leverage: Increased to 37.4% from 34.3% in the previous year.
• Weighted Average Debt Maturity: Maintained at 2.9 years with a weighted average financing cost of 4.42%.
• Sustainability-Linked Bonds: Issued S\$100 million in 5-year 4.15% senior unsecured sustainability-linked bonds, a first of its kind in Asia.

Market Outlook

While the REIT has demonstrated resilience, shareholders should be aware of external headwinds:

• Singapore’s economy grew at a slower pace of 4.0% in 2024, with significant uncertainties affecting the outlook for 2025.
• A surge in industrial space supply in 2025 is expected to exert pressure on occupancy rates and rental growth.
• Geopolitical tensions and elevated interest rates pose risks to both the global and local economies.

Despite these challenges, the REIT remains committed to navigating uncertainties and driving long-term growth through strategic initiatives and prudent financial management.