While there were outperforming REITs for the quarter, there were a number of REITs that failed to put in a decent set of results for the quarter. In the final part of the 1Q17 report card series for REITs, we highlight five REITs that had a quarter they wish they could forget.
1. Frasers Commercial Trust
Frasers Commercial Trust delivered an above average quarterly result with the Australian segment delivering as the Australian portfolio benefited from stronger AUD and higher occupancy. This drove DPU growth to two percent year-on-year.
While the uncertainty of a potential loss of HP as a tenant at Alexandra Technopark appears largely unfavourable for Frasers Commercial Trust, it could turn out to be a silver lining for Frasers Commercial Trust as the vacating of Alexandra Technopark could allow asset enhancement initiative works to be carried out.
This will boost the potential rental contribution from Alexandra Technopark in the future.
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Performance Grade For The Quarter: B+
2. Cache Logistics Trust
Source: Business Times
While Cache Logistics Trust continues to struggle with the legal proceedings for Schenker Megahub, Cache Logistics Trust was helped by higher than expected contribution from the DHL ARC (96 percent occupied). DHL is currently taking up a long rental lease of about ten years.
Organically, Cache Logistics Trust had a slightly disappointing quarter with DPU declining by 8.5 percent year-on-year (excluding capital gains paid out from divestment of Kim Heng Warehouse). Cache also recorded higher expenses in converting some of its master leased assets (Hi-Speed Logistics Centre) to multi-tenancies.
One-off divestment cost was also recorded from the divestment of Districentre 3.
Performance Grade For The Quarter: B-
3. Keppel REIT
1Q17 was not the quarter that Keppel REIT shareholders had hoped for. Keppel REIT’s 1Q17 DPU missed consensus estimates as a lack of contribution from 77 King Street (divested in 1Q16) and lower income from Bugis Junction Tower kicked in. The negative rental reversion of one percent for the quarter was a surprise though as Keppel REIT improved from its negative rental reversion of nine percent for FY2016.
Performance Grade For The Quarter: B-
4. First REIT
First REIT had a slightly above average quarter attributable to contribution from Siloam Hospitals Labuan Bajo. Costs were also lowered due to lower interest from the absence of medium term note exercise as well as reduced tax expenses.
However, First REIT’s announcement to terminate its initial plan to acquire Siloam Hospitals Yogyakarta has flagged the slowing of its near-term inorganic growth. While the transaction to acquire Siloam Hospitals Yogyakarta will continue once the relevant operation licenses are received, it is only expected to be in late 2017.
Performance Grade For The Quarter: B
5. CapitaLand Mall Trust
CapitaMall Trust saw its revenue and net property income decline in 1Q17 due to higher property tax expense and the income vacuum from Funan Mall’s asset enhancement initiative project. 1Q17 was also the renewal period for its major tenants (Westgate and Bedok Mall).
Due to weaker retail outlook (i.e. slower shopper growth, cautious consumer spending and lower tenant sales), CapitaMall Trust saw its rental renewal leading to negative rental reversion of -2.3 percent.
With 14.5 and 29.4 percent of net lettable area up for renewal in the coming two years, CapitaMall Trust could further suffer from the weak retail market and cautious consumer sentiments. CapitaMall Trust is unlikely to escape from pressure on rental rates in the next two years with the possibility of experiencing worse-than-expected negative rental reversion.
Performance Grade For The Quarter: C+
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