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AIMS AMP Capital Industrial REIT challenged.

Thursday, July 27, 2017

I have said before that AA REIT is not unique in the industrial REIT space. All industrial landlords in Singapore are facing difficulties presented by over supply and weaker demand. 

From the latest results presented by AA REIT, it is obvious that the difficult environment is not letting up anytime soon.

1. New and renewed leases are at a weighted average rental decrease of 4.3%.

2. Portfolio occupancy has declined from 94.6% to 91.0%.

Things are admittedly difficult but they are far from grim.

103 Defu Lane 10.

A competent management has kept gearing manageable at 36.3% and also managed to reduce overall blended funding cost to 3.6%.

Interest cover ratio is healthy at 4.9x and NAV per unit stands at $1.39.

We tend to be a bit less cautious when the stock market is doing better but it pays to go back to the fundamentals. Just two days ago:
Remember, price is what we pay and value is what we get.

Also, try to put things in perspective. This is hardly a crisis.

Things would probably look up when 2 development projects (51 Marsiling Road and 8 Tuas Ave 20) are completed in 2H 2017.

30 Tuas West Road. Published on 20 July 2017.
Slides presentation: HERE


Kevin said...

Hi AK,

I can't wait for Beyonics to begin their 10 year master lease over at 51 Marsiling Road. Any news on tenants for 8 Tuas Ave 20? ;)

I agree with you that the stock market is doing better but it pays to go back to the fundamentals and that is why we should not never be a boiling frog. ;P

Spur said...

Kekeke!!! Wonder what will be the reactions in the next bear market when prices go down -30% or -40% ....

Now bulling along .... most good assets are slightly over-valued or fairly valued at best....

Sigh .... just twiddling thumbs....

AK71 said...

Hi Kevin,

I will leave the worrying in the capable hands of the manager. I lazy. ;p

Thanks for that graphic reminder. ;)

AK71 said...

Hi Spur,

We cannot predict but we can prepare.

War chest is slowly but surely filling up. ;)

Unintelligent Nerd said...

Hi AK,

I sold 50% of my AIMS AMP REIT stake. Not because of this lah!

It took up 20% of my portfolio mah.

AK71 said...

Hi UN,

Once upon a time, AA REIT formed about 20% of my portfolio too. It has shrunk over time although I have not done anything significant to my investment. My portfolio size has grown. :)

AK71 said...

AIMS AMP Capital Industrial REIT Management Limited (the Manager) as manager of AIMS AMP Capital Industrial REIT (AA REIT) today announced that the Temporary Occupation Permit (TOP) for its redevelopment at 8 & 10 Tuas Avenue 20 (Property) was issued on 29 August 2017. With the redevelopment, the land parcels at 8 & 10 Tuas Avenue 20 are amalgamated and will now be known as 8 Tuas Avenue 20.

The redevelopment has transformed two adjoining two-storey detached industrial spaces into a three-storey contemporary industrial facility suitable for production and warehouse usage. The Property has 12 loading and unloading bays with dock-levellers, direct vehicular access to the second storey via a ramp and cargo lift access to the third storey.

The redevelopment increased the Property’s gross floor area by 35.2 per cent, from 117,521 square feet to 158,853 square feet.

Kevin said...

AIMS AMP REIT secures ten-year lease for Tuas Avenue 20 property. :) :) :)

AK71 said...

Hi Kevin,

That is very good news. Thanks for sharing this. :)

AK71 said...

Singapore, 26 October 2017 – AIMS AMP Capital Industrial REIT Management Limited (the Manager) as manager of AIMS AMP Capital Industrial REIT (AA REIT) today announced a 2.0 per cent quarter-on-quarter increase in Distribution Per Unit (DPU) to 2.55 cents for the quarter ended 30 September 2017 (2Q FY2018).

Gross revenue rose by 1.5 per cent to S$60.0 million, while net property income (NPI) remained stable at S$39.5 million for the first half of FY2018 compared to the same period in the preceding year. During the quarter, the Manager successfully executed 17 new and renewal leases representing 47,206.6 sqm (7.4 per cent of net lettable area).

AA REIT achieved overall portfolio occupancy of 88.8 per cent(1) which is currently in line with the Singapore industrial average of 88.7 per cent.

The Manager’s Chief Executive Officer, Koh Wee Lih said, “We are pleased to report an improvement in DPU this quarter. Our continued focus on proactive asset and lease management, and prudent investment strategy has allowed for a stable performance and distribution to unitholders.”

“However, the Singapore industrial property market still remains soft, with the oversupply situation continuing to exert a downward pressure on rentals and occupancy. Our focus moving forward is on managing capital and risk, and building a higher quality portfolio through asset enhancement initiatives and acquisitions,” said Mr Koh.

Amidst the headwinds in the market, AA REIT continues to maintain a strong financial position with a well-staggered debt maturity profile through prudent capital management.

As at 30 September 2017, 81.4 per cent of the portfolio’s interest rate is fixed taking into account interest rate swap contracts and fixed rate notes. Overall blended funding cost is at 3.6 per cent. Aggregate leverage is at 37.3 per cent while weighted average debt maturity on a pro forma basis is 2.3 years(2) with no debt due for refinancing until November 2018.

The redevelopment at 8 Tuas Avenue 20 recently achieved Temporary Occupation Permit (TOP) on 29 August 2017. A tenant has been secured for the ground floor on 4 September 2017 for a period of 10 years with rent escalations during the term. Meanwhile, AA REIT’s greenfield build-to-suit development at 51 Marsiling Road is targeted to be completed in 3Q FY2018. The development is pre-committed to a 10-year master lease term with Beyonics International Pte Ltd with rent escalations.

AK71 said...

AIMS AMP Capital Industrial REIT has launched of a private placement exercise to raise gross proceeds of at least SGD50 million.

The placement will see the REIT issue between 37,175,000 and 38,314,000 new units at an issue price of between SGD1.305 and SGD1.345 each.

The issue price represents a discount of between 4.1% and 6.9% to the volume weighted average price of SGD1.402 per unit, for trades done on the Singapore Exchange on 21 November 2017.

Proceeds from the exercise will primarily be used to partially repay the REIT’s existing borrowings to reduce aggregate leverage, and create additional debt headroom for future potential acquisitions, and asset enhancement initiatives (AEIs), among others.

AK71 said...

"AIMS AMP Capital Industrial REIT is facing headwinds and things might get tougher in the next year or two but it has a competent manager that is focused on improving value for stakeholders.

"I am glad I decided to get on board with Mr. George Wang so many years ago and I look forward to receiving soon to be free money every quarter for many more years to come."


AK71 said...

"DBS has initiated coverage on AIMS AMP Capital Industrial REIT (AA REIT) and believes that it could be a potential target for a takeover given prevailing signs."

AK says...
Nooooooooo! Please, noooooo! :(

AK71 said...

AIMS AMP Capital Industrial REIT (AAREIT SP): BUY
Last Traded Price: $1.38; Price Target: $1.55 (Upside 12.6%)

Making the right moves
• Resilient industrial gem that offers above-average yield of 7.4%-7.6% over FY19-FY21
• Extraction of value from greenfield projects and addition of c.600,000 sqft of untapped GFA could drive revenues by c.16%
• Potential takeover target amid global hunt for quality assets
• Initiate with BUY and TP of S$1.55; addition of untapped GFA could raise fair value to S$1.65 or more

CL said...

Quoting from your comment: "AA REIT achieved overall portfolio occupancy of 88.8 per cent(1) which is currently in line with the Singapore industrial average of 88.7 per cent."

Q1) Where can I find the industrial average information for Industrial Reit (also for other REIT and other stocks)?

Referring to for AA REIT, the history showed that it announced distribution 5 times on 28-Nov-2017, 3 times on 02-Nov-2017, 3 times on 04-Aug-2017, 3 times on 05-May-2017, 3 times on 15-Feb-2017.

Q2) In this case, is it right for me to assume that there will be another 1 to 2 payments in the upcoming November in 2018? Where in the annual report can I find out about the distribution period information??

AK71 said...

Hi Chris,

1. I believe it was a statement made by the REIT, not me.

2. AA REIT distributes income 4 times a year. Quarterly DPU. In some years, there could be more but those are not normal years. To find out why 5 distributions that year, read the announcements that came with the distributions.

In both instances, if you want to know more, you can write to AA REIT with your questions. ;)

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