Sabana Industrial REIT Reports Record Revenue Amid Internalisation Challenges
Sabana Industrial Real Estate Investment Trust (REIT) has reported an all-time high gross revenue of S\$113.3 million for FY 2024, marking a 1.3% year-on-year increase. The REIT also achieved its highest net property income (NPI) since 2016 at S\$57.5 million, a 4.5% rise from the previous year. However, these achievements come amid rising costs, higher borrowing expenses, and challenges linked to its ongoing internalisation process, which could significantly impact shareholder value moving forward.
Key Financial Highlights
- Gross Revenue: S\$113.3 million (+1.3% y-o-y).
- Net Property Income (NPI): S\$57.5 million (+4.5% y-o-y).
- Distribution Per Unit (DPU): 2.86 cents (+3.6% y-o-y).
- Aggregate Leverage: Increased to 37.4% (from 34.3% at the end of 2023).
- Average All-In Financing Cost: Jumped to 4.42% (from 3.89% in 2023).
- Portfolio Valuation: Rose slightly to S\$915.9 million (up from S\$903.9 million in 2023).
Internalisation Costs and Potential Financial Risks
The REIT has incurred cumulative internalisation expenses of S\$11.39 million as of 31 December 2024. These include legal and professional fees, costs for convening multiple Extraordinary General Meetings (EGMs), and the implementation of resolutions to internalise the REIT’s management. Notably, approximately 10% of distributable income for FY 2024 was retained for capital management, with further retention likely in FY 2025.
The ongoing internalisation process also poses significant risks, including the potential triggering of a review event under existing financing arrangements. If unresolved, this could lead to mandatory prepayments of borrowings, casting doubt on the REIT’s ability to continue as a going concern. Shareholders are advised to monitor updates closely, as this could materially affect the REIT’s financial stability and share price.
Operational and Portfolio Performance
Portfolio occupancy declined to 85.0% as of 31 December 2024, down from 91.2% a year earlier, primarily due to the repossession and reconfiguration of certain properties. Despite this, the REIT achieved a four-year high positive rental reversion of 20.6%, supported by strong proactive leasing efforts. Notably, 96.8% of expiring leases in FY 2024 were renewed or replaced, demonstrating strong tenant retention and demand.
Significant progress was made in sustainability initiatives, with solar panels installed across nine properties now fully operational. This positions the REIT to become one of Singapore’s first carbon-neutral industrial REITs by 2040.
Market Outlook and Challenges
Looking ahead, the REIT faces headwinds from rising costs, elevated interest rates, and geopolitical uncertainties. The Singapore industrial property market is expected to see increased supply in 2025, particularly in business parks and warehouse spaces, which could pressure occupancy and rents. However, high-tech factory demand is anticipated to grow, supported by lower interest rates and a flight to quality.
Despite these challenges, the REIT remains focused on tenant engagement, asset enhancements, and sustainability initiatives to drive long-term value for unitholders.
Key Dates for Shareholders
- DPU for 2H 2024: 1.52 cents (+32.2% y-o-y).
- Ex-Date: 28 January 2025.
- Distribution Payment Date: 28 February 2025.
Conclusion
Sabana Industrial REIT’s FY 2024 results showcase a resilient performance amid ongoing internalisation challenges and macroeconomic pressures. With record revenue, positive rental reversions, and sustainability milestones, the REIT remains well-positioned for long-term growth. However, the financial risks associated with the internalisation process warrant close attention from investors.
Disclaimer: The information in this article is for informational purposes only and does not constitute financial advice. Investors are advised to consult their financial advisors before making any investment decisions.
