Sabana REIT

Sabana REIT: 2Q14 DPU fell to 1.86¢ (-22.5% y/y, -1.1% q/q) which represents an annualized yield of 7.1%. The decrease in DPU was partly attributable to an increase in unit base by ~2.7m as a result of new units issued in 2Q14 as a result of the distribution re‐investment plan. Gross revenue at $25.4m (+17.6% y/y, +3.2% q/q) was led by the contribution from 508 Chai Chee Lane which was acquired in Sep '13 and higher gross revenue from 151 Lorong Chuan, which was converted into multi-tenanted lease arrangement in 4Q13. Net property income however came in at $18.4m (-9.3% y/y, -0.2% q/q) weighed by a rise in property expenses, due to higher property tax, maintenance, utilities and applicable land rent expenses. Going forward, property consultant DTZ Research, highlights that both average capital values and rents for conventional industrial space remained unchanged in 2Q14 and 1H14. That said, rents for high-tech space continued to edge up on account of high occupancy rates in the better quality buildings. Overall, Sabana expects market conditions to remain challenging, and the REIT aims to continue intensifying its marketing and leasing efforts to improve its portfolio occupancy, while also being on the lookout for selective acquisitions. Sabana’s portfolio occupancy currently stands at 90.8%, largely unchanged versus the 90.6% in 1Q14, with an acceptable aggregate leverage of 37.0%. The REIT currently trades at 0.96x P/B and an annualized yield of 7.1%, versus industrial peer average of 1.1x P/B and 7.3% yield.